$20 Million Sounds About Right

A loud chorus of scoffing  has been the Thoroughbred industry's response to the $20 million estimated valuation of Horse of the Year Curlin in recent discussions.  Jess Jackson has offered $4 million for the remaining 20% ownership of Curlin, and by extrapolation, the overall value of $20 million has been achieved.  Some in the industry have questioned Jackson's self-interest in the appraisal, indicating that they think he's trying to get an insider's deal on full ownership of the star runner, at a price lower than fair value.

That's bollocks.

The minority share of Curlin was offered at public auction and didn't receive an acceptable bid.  The market spoke.  Curlin's value cannot be determined by comparing it to inflated stallion syndication deals of times gone by -- or even by gauging it against high-profile bloodstock sales of the recent past (such as Better Than Honour's $14 million price tag).

Look at the figures and decide for yourself.  If Curlin goes to stud at a $100,000 fee and covers 100 mares a season for three years with an 80% live foal rate, he would bring in $24 million.  That's assuming that the full stud fee is paid for each breeding -- an event considered unlikely in a stallion's second and third seasons at stud.  Of that $24 million, a huge sum will be spent on insurance, advertising and marketing, and handling/maintenance expenses.  At the end of three years, then, it's possible for Curlin's owner(s) to BREAK EVEN on him at a $20 million valuation. 

Play around with the numbers.  See if you can beat me.  But be realistic -- at a $200,000 stud fee, Curlin wouldn't see anywhere near 100 mares paying full price. He's also not going to cover 200 mares a year in the current breeding market, at any fee in the six figures. 

Any talk of the stallion's being worth $50 or $100 million is just crazy.  If Curlin beats the odds and proves to be a big success in the breeding shed, and Jess Jackson starts making a huge profit with him after his fourth season at stud... I'll applaud Jackson and his Stonestreet Stables.  They'll deserve congratulations for taking a risk in a bad economy and making it work. 

And you know what?  I suspect that those profits will be reinvested in the Thoroughbred industry.  Jackson's proven over the past few years that he's one of the industry's most proactive forces for making horse racing a better sport. 

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