03/30/2017 12:58PM

Pegasus stakeholders to meet, get paid, discuss 2018 event

Email

Stakeholders in the inaugural $12 million Pegasus Would Cup are scheduled to meet with officials of The Stronach Group on Friday and Saturday at Gulfstream Park in Florida to receive their disbursement of revenue from the race and discuss the 2018 running, Stronach Group officials confirmed Thursday.

The meetings will be led by Belinda Stronach, the daughter of The Stronach Group’s founder, Frank Stronach. She was elevated to president and chairman of the company shortly after plans for the Pegasus were announced early last year. Most stakeholders are expected to attend the meetings, though some will attend remotely, officials have said.

Mike Rogers, a member of the executive board of The Stronach Group who spearheaded the operations of the Pegasus, said in an e-mail response to questions that there were two items on the agenda for the two days of meetings: a “recap of 2017” and a “discussion on 2018.”

The purse of the Pegasus was funded by the sale of 12 slots in the race for $1 million each. Under that structure, each slot owner was given a marketable right to start a horse in the race as well as a one-twelfth share of certain revenue sources related to the race. The sale of the slots was administered by The Stronach Group, a vertically integrated Stronach family company that owns Gulfstream among a host of other racing assets.

Rogers declined to provide a figure for the revenue disbursement to each shareholder. Under the agreement signed by the slot owners, the disbursement was required to be distributed within 60 days of the race, which was held Jan. 28.

“I cannot comment on any financial aspect of the event,” Rogers said. Rogers also declined to provide specifics about discussion items for the meeting.

While the Pegasus garnered intense interest from horse-racing fans due to its enormous purse and a rematch between Arrogate and California Chrome, the one-two finishers in the 2016 Breeders’ Cup Classic, the revenue share for each stakeholder is not expected to exceed $400,000, including a $250,000 payment guaranteed to each starter who finished worse than third. As a result, nine of the 12 stakeholders in the race are expected to lose a significant amount of money on their $1 million investment.

The Pegasus was won by Arrogate, who collected a $7 million purse for owner Juddmonte Farms while racing in a slot purchased by the international racing and breeding operation Coolmore. The second-place finisher was Shaman Ghost, owned by Frank Stronach, who collected $1.75 million from the purse. Third place, worth $1 million in purse earnings, was taken by Neolithic, who started for a partnership led by Jack Wolf, who was hired by The Stronach Group prior to the Pegasus to administer certain aspects of the race.

Stakeholders in the 2017 event have the right to purchase a slot in the 2018 race prior to the slots being offered to other potential buyers. Because of the substantial losses the majority of stakeholders suffered – and the emergence of a market for the slots that was highly favorable to the owners of potential starters in the race, rather than the owners of the slots – it is unlikely that many of the stakeholders in the 2017 event will exercise those rights for 2018 under the existing structure.

Efforts by Daily Racing Form over the past week to obtain comments from slot owners have been unsuccessful.

Belinda Stronach is expected to stress during the meetings that the Pegasus holds significant potential for subsequent years, citing demand for high-priced tickets to the event and the 1.23 overnight rating for the race, considered a decent number for a racing broadcast. But officials of The Stronach Group are also expected to float significant changes to the structure of the race and the revenue-sharing deal to address the potential lack of demand for slots for the 2018 event.

Stronach officials have declined to provide detailed information about the various revenue sources for the race or the structure of the revenue-sharing deal. The 2017 agreement provided slot owners with a share of most of the handle on the race as well as shares of sponsorship deals and the net revenue from the television broadcast, but the sponsorship and television revenue was expected to be negligible (The Stronach Group purchased a two-hour broadcast window on NBC for the Pegasus telecast). The agreement did not provide a share of ticket sales to slot owners.

The structure of the Pegasus has already been mimicked in Australia, where Racing New South Wales recently sold 12 guaranteed slots for a new $7.5 million race, the Everest Stakes, for approximately $450,000 each. However, those slots required investors to purchase a slot for three consecutive runnings of the race, for a total of $1.35 million each. The Everest is scheduled to be held Oct. 14 during the Royal Randwick meeting.