Kevin Richardson grew up in West Baltimore and credits horse racing for keeping him out of trouble. He started cleaning stables and worked his way up to assistant coach. His love of sport led him to become an owner and today he boasts of owning shares in 25 horses.
“Starting at the bottom and eventually becoming the owner or partner of a great racehorse is everyone’s dream,” said Richardson as he stood in front of the horse stalls at the Pimlico Race Course in Baltimore.
Companies like SportBLX and Myracehorse.com offer shares in racehorses to investors. For less than $ 100 a share, people can own a fraction of the race winnings, stud fees, and other income. It also opens doors for attending events.
The offers are regulated by the Securities and Exchange Commission, which requires investors to hold shares for at least one year. There is currently not enough market for investors to sell these stocks. Instead, the holding company will be liquidated when the horse is done and the investors are paid the residual returns.
Richardson has invested through both SportBLX and MyRaceHorse.com.
“I want to make money like everyone else. But for that reason you can’t come in, ”he said.
SportBLX co-founder Joe De Perio admitted that making money investing in racehorses is difficult.
“You shouldn’t think you’re going to make a lot of money because the numbers … don’t confirm it,” said De Perio.
When a horse is racing, there can be great volatility. A win can add value to the prizes, along with stud fees and leasing opportunities, but injury can wipe out the value. This makes the pricing of racehorses risky and increases the challenge of what is known as a Regulation A offer. Under this security, every horse offer must be approved and the schedule for this can take several months.
“What happened is we just had to stay away from racing-age horses. And we kind of got into buying babies, yearlings, two-year-olds, and they don’t have that kind of volatility,” said Michael Behrens, CEO of MyRaceHorse .com.
Rep. Andy Barr, a Republican whose Lexington, Kentucky borough is in the so-called “Horse Capital of the World,” urges the SEC to make it easier for private investors to get involved in a racehorse.
“Innovative companies are democratizing the exciting business of owning horses by selling stocks of these horses and allowing retail investors to own some of the racehorses they see in the Kentucky Derby, Belmont Stakes and other races nationwide. Unfortunately, government bureaucracy is holding back the growth of this innovation, “Barr said.
The greatest excitement experiences the owners of horses who actively race. The platforms meet investors’ desire for the benefits of ownership. In addition to shares, ownership offers the opportunity to meet with coaches, visit stables and even have a photo taken in the winners’ circle.
“Many of our investors have been very keen to take part in horse racing,” said Behrens, adding that it was a “fun part of the game.”
MyRaceHorse.com sold shares in Authentic before winning the 2020 Kentucky Derby. Investors had to be part of the excitement of owning a winner, but the prize money for this race wasn’t a huge payoff for investors. Performance awards to the original owners and expenses made up the bulk of this prepayment, even as the horse increased in value in stud fees.
Investor Elliot Levine said he could offset the four stocks of Authentic he bought from MyRaceHorse.com.
“Boy, it was the biggest thrill being part of a horse in the derby,” said Levine.
The disclosures required by the SEC make it clear that the risk to these investments is high.
“These risks include holding your investment for months or years with limited or no ability to resell and losing all of your investment; You must be able to suffer a total loss of your investment without changing your lifestyle, ”the MyRaceHorse. com prospectus reads.
“People really do it for the idea of joining a community to get access to a world, to go to physical events that allow you to get closer to that horse and the asset you have invested in. “Said Behrens.
Risks could turn into rewards if investing in racehorses inspires enthusiasm for the sport, which has fallen dramatically in popularity over the past 20 years.
Barr, who sponsored the Horse Racing Integrity and Safety Act signed last year, said he hoped the investment interest combined with a drug safety and competitive standards program “can strengthen the future of the sport for generations to come.”
This is a bet horse racing fans will pay off on.