Horse racing/breeding business model?
Posted: Sat Sep 14, 2024 11:36 pm
Newbie question here -- I am a financial professional and I have been struggling to make sense of the horse racing/breeding industry.
Apparently overall racing prize monies in the aggregate are a fraction of the stud fees and other breeding costs. In fact, a horse with $5m career race prizes often times can charge 10-30 times more in career stud fees. There also dozens of stakeholders in this entire ecosystem ranging all the way from vets to trainers and barn helpers especially since wea are talking about delicate living creatures. Even relatively successful horses (say $1m career winnings) don't seem to make much financial sense career wise if you consider all the costs along the way. Not to mention major busts like Green Monkey, etc.
In my field of private equity, when you acquire equity of a private company at $5 a share (and pay accountants, lawyers and bankers along the way), you are expecting to exit at $50 or more upon IPO. Here, the chances of making back your investment from racing seems pretty grim. If you rely on stud fees, then it almost seems like (dare I say) a Ponzi scheme coz you are just relying on the newcomers to pay the existing investors but not from the investments themselves.
What am I missing?
Apparently overall racing prize monies in the aggregate are a fraction of the stud fees and other breeding costs. In fact, a horse with $5m career race prizes often times can charge 10-30 times more in career stud fees. There also dozens of stakeholders in this entire ecosystem ranging all the way from vets to trainers and barn helpers especially since wea are talking about delicate living creatures. Even relatively successful horses (say $1m career winnings) don't seem to make much financial sense career wise if you consider all the costs along the way. Not to mention major busts like Green Monkey, etc.
In my field of private equity, when you acquire equity of a private company at $5 a share (and pay accountants, lawyers and bankers along the way), you are expecting to exit at $50 or more upon IPO. Here, the chances of making back your investment from racing seems pretty grim. If you rely on stud fees, then it almost seems like (dare I say) a Ponzi scheme coz you are just relying on the newcomers to pay the existing investors but not from the investments themselves.
What am I missing?