There’s an adage in the horse business: A horse is only worth what someone is willing to pay for it.
And here’s another one: Buyer beware.
The latest outrage-venting brouhaha on Twitter is about a horse named Steinbeck’s valuation. It’s been brought to our collective attention by none other than Ray Paulick, who’s been on something of a Joe McCarthy crusade to expose what he thinks are the bad actors in the game. That’s Commies to you, bruh.
If Paulick’s numbers are correct in this tweet, $123,250 for 10 percent of the horse gives Steinbeck a total valuation $1,232,500, and obviously no one in her right mind would pay that for a horse being offered for sale for $30,000. Now, I’ve read a tweet from one of the principals of the offering saying the valuation was based on the colt’s 2yo auction price, plus two years of expenses and management fees, and shares were no longer being offered, which sounds legit enough.
This post, however, isn’t about the double dutch flex between Paulick and this group, and it’s not a judgment of either party, either. You can make up your own minds about that.
This is about how horses get valued.
Steinbeck, a 2yo son of Frosted, was purchased by WinStar for $650,000 at a premier 2yos-in-training sale in March. Ten percent of that price is $65,000, but the offering was for $58,250 more. Two years of up-front training expenses at $5,000 a month (keeping round number rounds, including veterinary expenses in that total) would be about $120,000, and ten percent of this is $12,000. The management fee was apparently $9,000.
Let’s add up the numbers for the ten percent valuation. Purchase price of $65,000, plus $12,000, plus $9,000 equals $86,000, which leaves a difference of $37,250. I haven’t included insurance and transportation in the fees, which will reduce that difference, but the lion’s share of that must be the markup, which, if true, is significant.
Buyer beware, right?
A horse’s value can increase or decrease at any given time, however. Steinbeck, for example, has been exposed now, and he’s not worth the $650,000 that he made at auction earlier this year. However, just before he made his debut in a maiden special at Saratoga in late August, his overall valuation may have been higher than $650,000 if he’d been showing potential in the mornings.
Steinbeck finished sixth of seven at 5-1 in his debut, a race emphatically won by Jack Christoper. A $135,000 yearling, Jack Christopher next won the Grade 1 Champagne S., and his value went through the roof, with Coolmore and Peter Brant subsequently buying a minority share in the colt.
Had Steinbeck done what Jack Christoper did, his overall valuation could easily have been in the $5 million range, making the 10 percent worth about $500,000 — much higher than the $123,250 it was initially valued at by the group holding that position.
Much of the outrage in Steinbeck’s case appears to hover around what seems a big markup versus the purchase price, but in this sport, value, as I noted earlier, is all about what someone is willing to pay.
Steinbeck, for instance, was purchased as a yearling for $125,000 by pinhookers Hoby and Layna Kight. The Kights broke and trained Steinbeck and re-offered him for sale as a 2yo, realizing a significant profit when the colt sold for $650,000 to WinStar.
That’s what successful pinhooking is all about — making a profit.
WinStar was fully aware the Kights had purchased Steinbeck for $125,000, but they felt the colt was worth $650,000 at the 2yo sale, based on how he’d worked, and they gave the pinhookers a windfall.
It didn’t work out for WinStar in this case, but the $500,000 that WinStar and partners paid for Justify as a yearling did, to the tune of a total valuation of the horse at $75 million.
At the end of the day, whatever someone pays for a horse is his business. He should be able to find out what the horse cost, what the expenses are, and what kind of profit he’s willing to give a seller, if he cares at all.
Of course, it’s much more interesting to read about the hopscotch of villainous markups.
I tend to stay neutral in these matters, as long as fraud is not in the equation.
Super villain MF DOOM put this well, spitting on “Doomsday”:
Real mens mind their own business
That's the difference between sissy-pissy rappers that's double-dutch
How come I hold the microphone double-clutch
Double dutch is a reference to jumping rope, two sparring ropes at a time; a double clutch, if you’ve driven a standard, is the practice of using the clutch in neutral. DOOM nails this, as far as I’m concerned.