$12-Million Pegasus World Cup: My Horse Against Yours

by | 05.12.2016 | 11:12am
Frank Stronach
Frank Stronach

Some people thought the late John Gaines was crazy in the early 1980s when he proposed Thoroughbred breeders fund a $10-million day of seven championship races. That idea, the Breeders' Cup – which has grown to a two-day $25-million extravaganza – has worked out pretty well.

It's not surprising that Frank Stronach's proposal for the Pegasus World Cup, a $12-million race funded by a $1-million-dollar entry fee from 12 participants, has raised eyebrows, too. It is out-of-the-box thinking in a sport steeped in tradition.

The concept for what would be the world's richest race is as old as the sport itself: I think my horse is faster than your horse.

The difference here – as details of the Jan. 28, 2017, race at Gulfstream Park begin to emerge – is that the horse in the starting gate doesn't necessarily have to be owned by the person putting up the money. The nominators are buying a slot in the starting gate for the chance to win a $7-million first prize; they can cut a deal with a willing partner that has the horse but not the money or conviction to gamble that kind of cash.

Here are some additional details on the conditions of the race, according to Jack Wolf, the Starlight Racing founder who has been retained by Frank Stronach to be CEO of the Pegasus World Cup:

–The race is nine furlongs on dirt (Wolf said the distance was chosen as a way of getting both mile and a quarter horses and milers who may stretch out an extra furlong)

–In addition to the $7-million first prize, second place pays $1.75 million, with $1 million to third and $250,000 each to fourth through 12th place.

–4-year-olds and up carry 124 pounds

–fillies and mares allowed 3 pound weight allowance

–3-year-olds allowed 3 pound weight allowance

–Southern Hemisphere 3-year-olds allowed 3 pound allowance

–horses competing without race-day furosemide (Lasix) allowed 5 pounds

The date is a quiet one on the sports calendar (it's the weekend before the Super Bowl in Houston) and placed midway between the Breeders' Cup Nov. 4-5 and Dubai World Cup in late March.

It's also early enough in the year that a horse committed to enter stud that breeding season could make the Pegasus World Cup his final career start.

Wolf said he is hoping to land a network television deal. In addition to the prize money, participants would share in 100 percent of the net income from pari-mutuel handle, media rights and sponsorship.

I've been to enough horse races, Thoroughbred auctions and stallion farms to know there are more than a dozen big-time gamblers in this business, and Wolf thinks so, too, as he and former Stronach Group executive Tom Ludt try to sell the concept to the major players.

“The list is fairly obvious of who those people are,” Wolf said. “We've had positive reaction so far. Hopefully we can close this up in the next couple of weeks.”

Wolf would not say who has committed to buying a spot in the starting gate, though sources have said several major players are in. Perry Martin, majority owner of 2014 Horse of the Year California Chrome, referenced the race after winning this year's Dubai World Cup.

Wolf said he and Ludt have until Aug. 31 to get to a minimum of 10 nominations he said are necessary to make this a “go.”

Will Frank Stronach's $12 Million Dollar Pegasus World Cup Idea Succeed?

 

  • I like the idea, just needlessly complicated. Move the Donn up a week and raise the purse. You wouldn’t get to 12 million that way, but if they just went above the Classic, they could promote it as the richest race in North America.

    • David

      Yes, but the subscription/futurity nature allows Frank to do what he’s made a career of – using other people’s money. Don’t get me wrong, he’s one of only a few who – considering his status as track owner and industry player – is capable of making such a concept come off. Actually, hope he succeeds.

  • Decimus_D

    My question is, is it just the one race on the card? Is that the handle they take from? The 12 million is for the race purse, which I get. I would assume you want other races that day to get multi-race wagers going? I would also assume you don’t want to be running 12.5 claimers before the race. You will need a couple hundred thousand more dollars. Or maybe that is the deal, this is the end of a card Gulfstream could put on (maybe have another Ranbow 6 end there) and the handle gets cut up. Though I heard they were leasing the track for the day.

    I am not going to lie, I think the idea has some merit, but there are so many details that I’d like to see to judge the possibility.

  • Jay

    ” 3 year olds allowed 3 pound weight allowance” for a race run Jan. 28. Hope this is a typo.

    • Ben van den Brink

      I thought the same.

      Otherwise they need to study some things about weight for ages and distance.

    • FourCats

      Can’t see anyone running a 3 year old in this race.

  • MLS

    I don’t know what Stronach is going to get out of this if the prize money,100 percent of the net income from pari-mutuel handle, media rights and sponsorship is going to the 12 putting up the $1 million each. It doesn’t add up…..

    • David Worley

      Perhaps he is doing something for the game that doesn’t directly financially benefit him. He is obviously, indirectly, benefitting from promotion for Gulfstream Park due to this race.

      • Kevin Callinan

        A prize fight held in Vegas usually benefits the venue in one way- casino action.

    • Meg Hiers

      If Gulfstream puts on a good race card that day, then he will be gaining plenty of profit from that alone, but it would also bring out a nice sized crowd too with its novelty and hopefully well known horses in the gate.

  • David Worley

    I know there are a lot of naysayers in the PR readership. But it is hard for me to see the downside on this idea and seems like a good one to me.

    • Tinky

      1) The winter is a natural break for top horses after the ARC, end of the European flat season, and BC. Do you imagine that it will be good for them, or their following campaigns, to stay in training?

      2) Gulfstream is a fast, tightly turning track, stacking the odds against most potential foreign runners, and at 9f., even those best suited to American Classic distances will be disadvantaged.

      3) Why would anyone put up $1m when if their runner isn’t likely to be one of the top two or three choices, and especially months ahead of time, when horses are so fragile?

      4) The timing is spectacularly bad. Real economies around the world (which stock markets no longer accurately reflect) are in serious trouble, and there will be another major crisis before the end of next year. Even those with big money will be pulling back (it’s already happening in the Fine Art market, etc.).

      5) The purse size is an idiotic gimmick, and would be a waste of money. Look at depth of quality of the horses that typically compete in the Dubai World Cup. There wasn’t a single top-class horse other than California Chrome in the recent edition, in spite of the obscenely big purse. In other words, you could attract as good a field with half the purse.

      • Kevin Callinan

        I would’ve bet a million you would dismiss it- it’s new, its has some of the top people in the game behind it and it bucks tradition #yettojointhe21stcentury

        • Tinky

          Glib, but predictably incorrect.

          If that were the case, I wouldn’t have been outspoken about serious medication reform, nor would I have been an early adopter of, and outspoken proponent of exchange wagering.

          #kevinstruggleswithfacts

          • Kevin Callinan

            Which point, where you didn’t understand the concept in the first place. Your points amplify the fact that you still don’t understand it. You own a stall and basically become a 1/12 partner in the race proceeds. At worst they are risking about 400K.

            This idea is way over your head..

          • Tinky

            For future reference, insults are not good substitutes for arguments, though I’m not surprised that you would resort to them.

            There is no way to know what the the net income will be, so how do you arrive at your 400k figure?

          • Kevin Callinan

            you get 250K for running, percentage of handle, sponsorships and TV rights at minimum will be 4 million. Breeders are going to buy every commercial and probably half the stalls.

          • Tinky

            Still not sure how you can be confident in those numbers. But for the sake of argument, let’s say that you’re correct. So, who, exactly, will be the ones willing to take $400k baths without reasonably good chances of winning or placing?

            Also, I find your assumption about breeders to be a bit odd, given the distance of the race. I understand the choice (as opposed to a 10f. race), but from a breeder’s perspective it is in no man’s land. The most important races around the world have long been run at a mile, 10 or 12 furlongs. There will never be an important division of 9f. horses.

          • Kevin Callinan

            Its not an insult to say that this idea is just beyond your scope. You want to catalog a brand new concept into your rigid, antiquated philosophies- its doesn’t work. It’s an investment in a ‘start-up’. 400K is two mares mating with AP our 4 with Speightstown (trained by Pletcher)….. it’s minimal risk for a significant reward.

          • Tinky

            Significant reward? For those other than the few associated with contenders? What significant reward? Spell it out.

          • Kevin Callinan

            If you had suggested that more three and four year old stars might stay in training with an incentive like this I’d respond. It’s too easy and unproductive to criticize an unproven idea- nothing improves with that approach.

          • Tinky

            So you are unwilling to argue with my specific criticisms because it’s “unproductive to criticize an unproven idea”? And such idea should be blindly supported?

            As I said above, you should be embarrassed.

          • carate

            Capitalism is not a culture welcome to sophists as they are fascist by nature, attempting to hold power by not allowing change. Please don’t denigrate a fascist because they feel they are in charge of what is best for the hoi polloi, which in this case would include owners, breeders, racing fans and handicappers, as that is a fascist’s job by golly.

          • Charles Smith

            #tinkyisacrabbypersonwhocomesofflikeabrokenrecord

      • kyle

        Re #3: You don’t nominate a particular horse. You buy a starting berth. You can use it yourself, sell it whole or in part.

        • Tinky

          Thanks for the correction. Nevertheless, who would spend $1m without prospective chances of a good return?

          • kyle

            Well, you got Jack Wolf. You got Team Chrome. Ken Ramsey just threw away 200k on a 50-1 shot. Getting people might not be the had part. Finding 12 horses that time of year..,that’s the challenge.

          • Tinky

            Well, I’m skeptical that other than those involved with two or three top horses that are suited to the conditions, they’ll be able top attract that kind of “investment”.

            Throwing away $200k on a Derby runner is much easier for me to understand than five times that amount with little hope of a positive return.

          • kyle

            The concept itself isn’t completely nuts. I just can’t imagine how you get a deep contentious field in late January. How and where do you even prep?

          • Tinky

            I agree.

          • lastromantribune

            they are called WHALES

          • NYBredfilly96

            Agreed! I thought the exact same thing. All the other ‘gravy’ (sponsorship etc.) are not guaranteed amts only the purse winnings are, and if they’re not attractive enough I believe it will affect it as well.

      • David Worley

        So Tinky, I preference my response here by saying “you know a hell of a lot more about TB racing than I do, but here are my retort.”

        1) The schedule dictates how horses train, so if this race gains traction perhaps training regimes will also adjust. This doesn’t seem like a good long-term argument against this idea.

        2) Every track has biases which will play to one set of horses over others.

        3) Two thoughts here: first off it is hard to know what the total take will be after you figure in handle and TV rights. So it may become a situation where you put up $1M and are guaranteed something close to that in return. Second, TB horse racing (ownership) is not an economically rational endeavor. We could say the exact same thing about most of the top purchases at the Keeneland Sept Sale “why would anyone give $900K for an unproven yearling…” Furthermore, think about how many millions are spent by owners to get a horse that is a potential derby participant or could potentially run in a Breeder’s Cup race; for most owners this is about glory not about making a profit.

        4) You already know what I think about this point; and I disagree with you. I’ll also point out to you that for the last three years you have been saying “in the (near term) global economies will collapse.” While there will certainly be a sell off in equity markets along with some form of recession (by definition we have to have one since we’ve had seven years of expansion) I am long term bullish on the American economy (particularly hard assets). I should also note that when you look at financial crisis they tend to be triggered by a sovereign failure or some sort or a commodities dip. Oil prices dropped and bottomed and if anything might have set off a crisis that would… and it did not. All of that being said, I think buying hard assets that are productive long term (think fertile farmland) especially if you can finance the purchase will long term, fixed, low interest money is a great idea. But, no, I think you are dead wrong about a 2008 repeat or worse.

        5) You are probably correct about attracting the same field with the smaller purse. But Stronach can always lower the price to gain participation (or subsidize it) but you can’t raise the price once announced. Furthermore, what you call a gimmick many people would call marketing. Saying $1M/$12M is easier and more ear catching that saying $500K/$6M. It would be pretty cool to say, ‘my horse won the richest race in the world…”

        Thoughts?

        • Tinky

          Thanks David.

          1) This issue overlaps number 5 on my list. The only ones who are likely to be inclined to adjust their schedules to point to a race like this would be those connected with a top dirt miler. Those connected with top 10f. runners, and/or European horses, will first point to races like the BC or ARC, etc., for reasons that should be obvious. For them, this race would likely be an afterthought, or a back-up, should their horse miss one of the big fall races.

          So the question, to my mind, is whether or not it would be wise to take a horse that has been trained to peak in one of those fall races, and truncate a subsequent, natural break, in order to try to get the horse to peak yet again, and to do so primarily for the purse money. I submit that the connections of top horses with stallion potential are unlikely to do so. Not only might such a schedule have repercussions later in the following season, but the conditions of the race itself won’t be ideal for many types of horses.

          I also question whether the race will gain traction, as you might have guessed.

          2) It is true that every track has characteristics which will play to the strengths of some types of runners, but what you suggest is wrong. Gulfstream is a tightly turning track, and long-striding horses, especially one-run types, can be severely disadvantaged. Sunday Silence beat Easy Goer in the BC at Gulfstream primarily because he was more athletic, while Pat Day had to hold the latter together on the turn before allowing him to stride out fully in the stretch.

          At Belmont, it wasn’t only the distance that caused the form reversal between those two, but also the fact that Belmont doesn’t disadvantage that type of horse.

          While the choice of nine furlongs is understandable, it stacks the deck even further against true American Classic types. A top miler is likely to enjoy a decisive edge over a top 10f. horse at Gulfstream, and that would be a shame, for obvious reasons.

          3) Kevin, who argued stridently about the wisdom of the concept, claims that the worst case would be a $400k loss for those failing to place (or sell their slots). I find that claim to be dubious, but even if we were to accept it, I disagree with your logic. I’ve worked with, and for billionaires, and I can assure you that while it may not represent a large percentage of their wealth, they wouldn’t be happy losing $400k. More importantly, I don’t think that the analogies used on this thread are taut. Buying a $400k yearling is an entirely different experience. First, there is a great deal of pleasure related to the purchase process. Then, there is the pleasure of watching the young horse develop. Those are huge, mitigating factors, even if the horse doesn’t become a star, and I don’t see this concept being closely analogous.

          After the initial $1m investment, would it really be thrilling to attempt to sell the slot at a profit? I doubt it, as there will likely be many more spots available than likely winners. Perhaps I’ll be proven wrong, but I suspect that it could be more nerve-wracking than exciting. Of course the owners of a horse like California Chrome are a different matter, but again, there will be very few in that category. And along those lines, let’s say that there were three top horses suited to the conditions, and all three buy slots. How are the other nine going to attract serious bids in August if it appears that the chances of placing, let alone winning, would be slim?

          Finally, I agree with you about the glory part, but I suspect that most owners would find it far more satisfying to win or place in a BC race than this one. Ask Barry Irwin which would be easier to promote to his investors.

          4) This is probably not the best place to go into depth on this discussion, but in a number of major countries around the world have recently suffered serious crises, or are on the cusp of one. Stock markets are no longer good guides to the health of economies, as they are openly manipulated by Central Banks. Do you know what percentage of ETFs the JCB owns? The Fed and ECB spend hundreds of billions buying treasuries, etc. Ponzi would be proud.

          Every major economy around the world is in trouble. Can you name one that is in remotely good shape? Crushing debt loads are the rule, rather than the exception. Do you imagine that creditors will be willing to simply write down those debts?

          The TBTF banks are in more precarious condition now than they were prior to the 2008 crisis. Deutsche Bank is in serious trouble, Take a look at their derivatives exposure.

          Fertile farmland is great, but how you can be bullish on the American economy in the near-term is a mystery to me. According to the Bureau of Labor Statistics, there are over 94m over 16 are not employed. There is a massive student loan bubble, and a massive sup-prime car loan bubble; the health care system is a disaster; shipping is down sharply; shale and fracking are in deep trouble in spite of the recent spike in oil prices; etc., etc.

          I have long had the end of 2017 as the latest that I can see the acceleration occurring, and stand by that. The collapse is is actually happening right now, but many are unaware of it, as the crisis isn’t yet full-blown.

          5) Throwing large sums of money at a race does not in any way guarantee the participation of the best horses in training, as the DWC has amply illustrated. The main reason for this is that the biggest money to made is still in the breeding shed, and winning the most important races trumps seeking out the biggest purse. If huge, eye-catching purses were the answer, Dubai would have attracted much better fields in recent years as the numbers escalated.

      • KYFan2

        My fear is that the horse’s best interest might not be served when so much money is on the line, considering purse plus percentage of other income sources.

        • Tinky

          Good point. Thanks.

  • John G. Veitch

    I’m not sure any owner would want to pay a $1 million entry fee. Bottom line is, is an owner willing to risk worst cast net $750K with the possibility of your horse breaking down??

    • Owners with multiple prospects would probably find it a better value than owners who are banking the million on just one horse.

  • kuzdal

    Now that an August date – for likely investors – has been established, is it really wise to invest 750K in January race? My brain says this’ll never get off the ground; far too many negatives with only one positive.

    The Stronach brand. That’s it.

    • It doesn’t seem quite as preposterous when you keep in mind that the purchaser is purchasing a stall in the race and isn’t necessarily investing everything in just one horse.

    • Meg Hiers

      I would guess they already had some pretty good assurances for participation before they decided to announce it officially. Professionals don’t announce something like this until discussions off the record have pretty much guaranteed it is a go.

  • Kevin Callinan

    In business today the slogan you often hear is ‘if haven’t changed your business model in the last two years you are likely out of business’. Horse racing has kept the same model for a century. New ideas like this deserve support. The idea that a stallion prospect needing one more big win could run and not miss the year in the shed makes it very attractive to the KY syndicates.

    • Native Diver

      Remember when John Gaines introduced his Breeders Cup proposal in the early 1980’s? In spite of ignorant opposition it has resulted in a revitalization of our industry. We need to keep injecting innovations to our business model if we are to survive.

      • Kevin Callinan

        I must admit ‘The Diver’ was one of my favorites growing up; on the east coast he was a phenom we never saw. I find the racing biz’ opposition to proposals knee-jerk. Visionaries like Gaines, Cot Campbell and Barry Irwin have persevered but many just cave to the cranky majority. Jack Wolf belongs in that company- he’ll make it work.

  • kyle

    I like it that third gets two purse awards. That’s unique.

    • RayPaulick

      Thanks for pointing out the error. It’s been fixed so that fourth through 12th receive $250,000 each.

  • Michael Castellano

    No owner or trainer will put up 1 million dollars to enter a race almost six months in advance. Horses have form cycles and get injuries. No one can know in advance if their horse will have a shot or will be in form or will be sound. And how many are they going to want to sell such a slot if they have to on the open market should something go wrong? You would basically have to forego all the other classic races and just train for this one if you want to have a realistic chance. The idea is moronic, and something that shows their ignorance of the sport. It will NEVER happen in its current form.

    • If it comes close to the race and you don’t have a horse, I wonder if people who have horses that are peaking would buy your slot from you.

      • Michael Castellano

        Initially, no one will know that their horse is peaking because their closing date is in August 31! So they would likely never get ten slots by then. Who is going to put up a million dollars for a slot when they do not yet have a horse they think will be in form and sound next January? And who would buy a slot without a horse? Or want to sell their slot if their horse breaks down?

        • Tinky

          exactly.

  • the buzz23

    This idea and business model, if there is one, seems ripe for failure. The TC and BC series are separated by enough months that there’s renewed interest every year. Why we now need another event, expressly for billionaires to massage their egos, is beyond me. For the casual fan the Kentucky Derby and BC events offer real betting value for the public and the social entertainment value is also fun for those their, and those that tune in. I have a lot of respect for Frank Stronach and the money he has pumped into this industry to keep it above water the past two decades (Santa Anita is a beautiful place to visit to this day and facilities much nicer than what we had in the 70’s), but this is an ill conceived idea for what seems like only he and his very rich friends to play high stakes poker. Good Luck to him and his team but I’m not interested.

  • Richard C

    Michael Buffer is bellowing — “Let’s Get Ready To Rumble!”

  • J

    This Another Bad Idea from Frank Stronach. He Was Going To Sell Condos at Gulfstream Park – The Proposal Didn’t Sell & HAS Been Abandoned. This Isn’t Going to Sell Either. JOHN Gaines had a Successful Plan. Young People Do Not Even Know Who Pegasus Was.

  • Old Timer

    What about horses that take a huge dump prior to the saddle going on should they get an extra 5 pounds too?? That’s what happens when you give a horse lasix right, they lose weight so that’s what this bs is all about.

    Seriously 5 pounds because you don’t use lasix, what a joke. Lasix is used to protect the horse from bleeding. So since I’m choosing to protect my animal I get hammered with an additional 5 pounds, get the f!@# outta here.

    • Matthew Hood

      The use of Lasix in this country is the real joke.

  • G. Rarick

    I do really like the idea that an owner buys a spot in the gate, rather than nominate a particular horse. It’s a throwback to the history of the sport, and it means Sheik Whoever will be making huge offers on horses who might do the job, so it’s nice for the little guy who might stumble on a good horse, because it will now sell for a huge price. Really too bad, though, that it’s not a medication-free race on a bigger turf track. The weight allowance for Lasix is a nice gesture, but five pounds isn’t enough. The timing also pretty much rules out foreign participation.

    • Matthew Hood

      It’s going to be tough to find 12 dirt horses who belong. Trying to find 12 turf horses would be near impossible without have many outclassed horses.

  • Tammy

    New ideas should always be welcome. Expecially with the fall of attendence at the tracks. Racing needs to bring back more interest in racing. Go for it. What will it hurt.

  • HowardRoark314

    From what I understand due to some insider info; as of right now 11 spots are locked in with $1,000,000 checks received. Take that for what’s it worth.

    • Meg Hiers

      I wouldn’t be surprised. There appear to be plenty of people willing to gamble millions on unproven yearlings with no guarantee on a return. I don’t think they are really looking for Euros, although they would definitely take them and top Euro milers run a mile and an eighth pretty often. The Jan date would mean some Southern Hemisphere horses would be in form. Really it is about the fun for the investors playing around with the starting gate stall pre race and then giving gamblers the chance to bet on a well matched field of 12 top level horses. As long as they don’t gouge the bettor with a crazy take out, they will be happy to bet on it. Also, a question about the distance-did they have to make it basically the Donn to be able to transfer the Grade 1 rating?

  • Mark Belling

    Like most Stronach ideas, this is weird. That doesn’t mean it won’t work. It likely will work. All sorts of posters here seem to think the slots will be bought by the owners of the horses. No.

    If I had a million laying around, here’s what I would do. You automatically get at least 250-K back. A conservative guess on the proceeds of the race is another 150,000. Your exposure won’t be more than $600,000.

    You wait as long as you can to then cut a deal. Say a horse wins the Cigar Mile. You cut a deal with that owner. You sell the right to half the purse for $200,000. That would be paying 200-K for the right to have a shot at 3.5 million. You probably have the horse owner split money only if the horse cracks the top three.

    There will be competition among the original shareholders to get the best horse. Some people might not even be able to sell their share because the horse they want is in high demand. They might have to give it away.

    Don’t be shocked if Stronach himself buys two shares.

  • Jack Frazier

    It may be a good idea and it might not and it seems that this is a reversal of what racing is about. Other than being held at a big track this is nothing more than match racing on an elitist scale. It may or may not give racing a boost and will have to run to see. It might just be a gimmick. Stronach promises the world and delivers a cold fish many times. I remember speaking to him at San Luis Rey Downs many moons ago about how he was going to change racing in California. Well he sure did. He hired Jack Lebeau and demolished Bay Meadows with the promise of building a better track inland and somehow Lebeau wound up at Hollywood Park and now it is gone. HIs operation doesn’t like Los Alamitos or Del Mar and he would help close them too if he can. He promised to help owners and trainers with stall subsidies at SLRD as well. It was closed for a long time and it is subsidized but not by Stronach. His operation is against any operation other than his own and he doesn’t support Golden Gate, which he owns, as it should be and instead has those in charge penalize selectively some owners and trainers who want to ship north from SoCal. I know this by personal experience. HIs operation at Gulfstream with year round racing is hurting racing in other jurisdictions as he want to be the czar of all racing in America. Thank goodness I don’t have to deal with it other than posting comments. And I don’t give two whits whether anyone agrees with me or not. If you have not been in the belly of the whale you don’t know how it feels to be devoured.

  • Hamish

    Imagine if Stronach weren’t throwing out a new idea from time to time, along with trying different things, where our fledgling sport/business/gambling enterprise would be now? Other than a few one off tracks with captive local markets, are there any things to really get excited about at the racetrack experience levels? This guys vested and he loves the horse, so bring it on!

  • Pamela Mac

    So agree. Now we have Perry Martin to take Gaines place. Gaines went through the media gauntlet yet he was adamant in his view that the race courses needed to tie into a central authority to even the playing field for owners old and new. Still miss John Gaines and probably always will.

  • All American Chutzpah

    Sounds like some are dumping the petrodollar. On us.

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