$10 a share: Stronach sets up new racehorse investment companies
So you've always wanted to own a piece of a racehorse but the entry-level costs are a little too much. A series of new public companies created by multiple Eclipse Award-winning horseman and racetrack owner Frank Stronach and associates might be just the ticket for you.
S-1 registration statements were filed in late December with the U.S. Securities and Exchange Commission for an initial public offering for six separate racing corporations (all named after prominent Stronach racehorses), with a share price set for $10. Each of the six corporations will own 20 Thoroughbreds purchased as yearlings in 2011, and a total of 405,000 shares will be offered in each corporation.
For example, the Awesome Again Racing Corporation (the others are named the Red Bullet, Ghostzapper, Perfect Sting, Ginger Punch, and Macho Uno) has 20 horses that will turn 2 years old Jan. 1. They were purchased as yearlings in 2011 for prices ranging from $4,000 to $310,000. The average cost per horse in each partnership is roughly $61,000.
The share prices will cover the cost of training and standard veterinary services ($150/day per horse in training and $50/day for layups) until November 2013, when the entire group of horses will be sold at public auction (minus those which may have been died due to illness or injury, or sold in claiming races). Each corporation will have $100,000 set aside for emergency veterinary care. As a normal course of business, the corporations will not have substitutes in the event of deceased or sold horses.
According to the S-1 registration statement, approximately 27% of the money raised through the sale of stock will go toward expenses related to the initial public offering, legal fees, accounting, and administration.
So, from an estimated $4,050,000 raised from each of the six offerings, approximately $1.2 million will go toward repaying Stronach companies for the purchase and early training of the yearlings, roughly $1.8 million will be spent on training/veterinary fees, and $1.1 million will go toward administrative and legal costs.
The individual racing corporations will be managed by Golden Pegasus, a privately held company formed by the Stronach Group. That company will have 10% ownership in each corporation. Stronach is chairman of the Golden Pegasus board of directors, which also includes Jack Brothers, Alon Ossip (executive vice president and counsel for the Stronach Group), Howard Walton, Lorne Weiss, and Ron Charles, who formerly ran Stronach's California racetracks. Golden Pegasus will make all decisions regarding the selection and hiring of trainers, which races to enter, and other related matters. Michael Rogers will serve as CEO of Golden Pegasus, with Mark Roberts president. Jack Brothers will be CEO of the individual corporations.
Horses owned by the corporation will be based on both the West and East Coasts, and the S-1 papers state the horses will favor races at Gulfstream Park and Santa Anita Park, tracks owned by the Stronach Group.
Stronach officials involved in the initial publilc offering did not return phone calls for comment, but Terry Finley, the president and founder of West Point Thoroughbreds, which offers privately held partnerships for racehorse ownership, said he viewed Stronach's creation of racing corporations in a very positive light. “The more people we have going online, Googling horse racing, learning about our business, learning about ownership and the game in general, the bigger the pool of people who say I'd like to get into a partnership,” Finley said.
Finley said he was unaware of any similar publicly traded racing corporations that focused solely on racehorse ownership. The corporations are not unlike the extremely popular racing clubs organized in Japan where everyday fans participate in “paper ownership” of horses at low entry-level fees. Some of Japan's biggest racing stars, including the recently retired 2010 Horse of the Year Buena Vista, are owned by racing clubs.
Ghostzapper Racing Corporation documents.
Ginger Purch Racing Corporation documents.
Macho Uno Racing Corporation documents.
Perfect String Racing Corporation documents.
Red Bullet Racing Corporation documents.
The website www.horseexchange.com has been reserved for additional information on the racing corporations.