Racehorse TALK

ah this old chestnut   

it's called a profit margin mate 

Why do you worry what their margin is? Do you expect them to do it for love 

I wasn't expecting those two reactions - have I unsuspectingly raised a sensitive issue?

I have no idea what a reasonable margin is for syndications. I was merely putting them up for all to see. The margins range widely.

I wasn't intending to be critical of syndications in general.

ITK, the first line of my thread said "...wondered what their margin was".

Your reply was "it's called a profit margin, mate".

Have I missed something in your response?

Gintara, I'm not "worried about their profit margins" - just making a comment which I followed up with an acknowledgement that there is a long way to go before their abilities are known, and I do understand that holding costs are involved.

ED

She is a syndicator and is sensitive when people point out what thieves they are.

 

I do not know a lot about how these syndicators work and am happy to keep it that way, however,
there are many numerous expenses involved between their purchase and the subsequent sale.
Absolutely nowhere near what they charge though and their profit margin would still be quite high.

The other factor is that most of these syndicators are "in bed" with certain trainers.

Anyone who thinks Gai isn't making money out of Star thoroughbreds syndications would be mistaken.
She picks them and is the sellling point for potential owners. She has the ready cash to finance it. Does anyone think she is not making money out of that?
 Denise Martin is a go between.

Likewise most other syndicators

I wonder if  Freedman was receiving monetary gain from Slade Bloodstock when they were syndicating for him??

Never owned a horse and certainly not involved with any syndicators if that's what you think 

My point was they don't do it for free  and why would you expect them to? it's no different to anything in life that's for sale, showing the sales figure against total share price when syndicated would be grossly misleading imho when trying to calculate profit margin

I don't know why there is such sensitivity about this topic.

Of course no one is expected to work for nothing.

The point I was trying to make is that the mark up (gross margin) varied widely. I acknowledged that there were holding costs, but I would suggest for the syndicator those costs are probably fixed costs.

I don't know what they are, but I'd suggest they would include:

Registration and printing of prospectus
Insurance
Transport
Breaking in
Agistment
Vets

Once the horse has reached a stage where it can be put into pre-training for initial assessment, all further costs would be borne by the syndicate as their monthly fee.

I have no idea how much it costs to break in a yearling these day, but let's say $7,500
Prospectus costs another $10,000
Agistment at $10/day for 4 months $1,500
Vets  $1,000
Transport $1,000
Insurance for 12 months $500
Postage and other syndication costs $2,000

Total before training fees start is therefore around $22,500

So the profit margin is actually the markup less the fixed costs.

In the first example above, the profit margin would be:

$88,500

You obviously have not owned a horse or if you have not in the last decade.

Sorry, hit the wrong button.

                        $88,500
less purchase cost: 30,000Gross Margin           $58,500

less other costs        22,500

Net Profit               $36,000

I don't know if I've missed other costs, and I'm happy if more knowledgable people supply any extra details, but I then ask is a profit margin of $36,000 on a $30,000 purchase a reasonable profit for a syndicator or not.

As a follow on, if most of the initial syndicator's costs are more or less fixed, does it not follow that the higher priced syndications give a greater net profit?

Now I don't think these questions are irrelevant.

If I am a potential shareholder, why should I not look at the syndicator and examine whether I am getting value for money?

Why can one syndicator do it more cheaply than another - is it because a premium is applied to the more "successful" syndicators?

Or do some cut corners, which could be to the detriment of the horse and the shareholders?

All of these questions are relevant to a potential participant, and I would certainly not part with a cent until I was satisfied with the bona fides of the syndicator and their business practices.

Please feel free to correct my calculations above or add extra information that I have obviously omitted through my admitted lack of knowledge.

For me, it's just an accounting exercise, not a security check of the people involved.

ED

You're correct SW.

Please feel free to fill in the gaps.

I'm very happy to learn. You never know, I might re-enter the owners' enclosure one day.

ED

Breaking in, closer to $2-3k, I think.

Agistment, $30/day

At the end of the day, like all "investments" the investor has to make up his/her own mind whether that investment is a sound one or not.

Dealing with a syndicator immediately leaves you at a significant disadvantage % wise

Like buying your groceries from the petrol station.
You will pay significantly more than true value.

Most punters don't understand the concept so it is no mystery that most owners don't either.

Good post DJH.

After the response that ED got I'm not game to repeat some of the stories that we have heard about this subject

Me thinks some people protest too much when this comes up.