Tuesday, 26 June 2012

Would you buy a share in “The Rip-off”?

Like many owners, I regularly receive flyers and marketing materials from racing syndicates, and I’m always interested in looking at the way they frame prices and costs.  Unfortunately in our industry there is an extremely common and, as far as I am concerned, very pernicious practice that’s regularly applied.  Here’s an example.

Syndicate manager goes to UK sales and buys a horse, The Rip-off, for £6,000 + VAT.  Pretty cheap and probably with a few negatives on conformation or breeding.  Never mind, it’ll be a “fun horse”.  Put together the sales bumf and offer it at £2,500 + VAT for a one-twelfth share.  A £6,000 horse is now priced at £30,000.  If you challenge the manager, he’ll probably say there are a lot of associated sales costs to justify it.  Utter nonsense.  If you add up the buyer’s premium, bloodstock agent’s commission, vetting and transport, it won’t exceed £3,000.
Three months’ initial keep, breaking fees, BHA fees, turnout, farrier, clipping, etc., etc., might come to another £3,000, but that will be covered by the monthly subscriptions.

Total cost for purchase and the first quarter therefore cannot exceed £12,000.  The syndicate manager, though, is now sitting on a 300% profit margin of £18,000 minimum.  Do this ten times a year and he’s got a cool £180,000!!

What should you do about it?  Firstly, never buy into a horse without seeing a fully transparent statement of account for the purchase and associated costs.  Secondly, refuse to be ripped off, and negotiate a fair price.

Thirdly, it might be far better to come to Owners for Owners, where we never adopt this practice.  There are no hidden margins on the purchase of the horse.  This is a scandalous practice.  I’m going to ask the trade body for syndicates what they think to it.  Should be an interesting discussion.


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