09/20/2016 2:40PM

Pegasus World Cup stake sold to Earle Mack

Barbara D. Livingston
Earle Mack purchased a slot in January's Pegasus World Cup.

A starting-berth slot in the $12 million Pegasus World Cup has already changed hands.

Sol Kumin and James Covello, Wall Street financiers who had put $200,000 down on a slot in the Pegasus with 11 other groups, sold the stake last week to Earle I. Mack, an owner-breeder who is a real-estate developer, both sides in the transaction said. The sale was brokered by officials of The Stronach Group, which created the Pegasus World Cup and is administering the race, just prior to the deadline for the stakeholders to put up $800,000 each to complete their purchases of one of the 12 Pegasus starting gate slots.

Kumin, a hedge-fund manager, said that he and Covello decided to seek a buyer after doing additional analysis of the potential returns from the Pegasus stake, which gives each stakeholder a reserved spot in the starting gate plus a share in some of the revenues derived from the race. Kumin and Covello, who did not own a horse that would be competitive in the race, put $200,000 down on the stake in mid-May, when many details about the race had yet to be ironed out.

“I still like the idea of the race, but when we looked at it again as a value proposition … we were looking at maybe losing 50 cents or 60 cents on the dollar for running seventh with a decent horse,” Kumin said. “We wish [The Stronach Group] all the luck in the world. They are trying to do a great job, but for us to do well we figured we needed to come first or second to make any money, maybe third to break even.”

Kumin declined to provide an exact price for the stake, but he said it was “very, very, very close to the original price” of $1 million.

The Pegasus World Cup, which was first proposed in general terms by owner-breeder Frank Stronach in January of this year, is scheduled for the last weekend in January, 2017, at Gulfstream Park, which is owned by Stronach’s private company. If it goes off as planned, it will be the richest race ever held, and it is the first race run under conditions in which buyers of stakes are able to sell, lease, or otherwise market their starting slots.

[For an in-depth look at the Pegasus World Cup, click here.]

Mack, who is on the board of the New York Racing Association, called Stronach a “dear friend” in an interview on Tuesday. He said he had been interested in buying a stake in the race since it was announced, though he does not currently own a horse that would fit in the race. Mack also said that he has lined up a partner for his stake, but he would not name the partner, while being coy about whether the partner owned a top-class horse.

“You never know,” he said. “This is horse racing.”

Mack called the concept of the World Cup “very exciting” and said that he thought it would be a “great investment.”

“When you put on the richest, the best, the first, that is remarkable,” Mack said. “I want to be part of that excitement.”

Under the terms of the race, each stakeholder is set to receive a one-twelfth share in the revenue derived from most of the wagering on the Pegasus and from sponsorships and television-rights deals tied to the race. However, Stronach Group officials have acknowledged that there will be no revenues from a television deal this year, and that the Stronach Group plans to pay a major television network to broadcast the race instead.

Mike Rogers, a member of The Stronach Group executive board who has been heavily involved in the planning for the race, said on Tuesday that all other 11 stakeholders in the race made their final $800,000 payments by the Sept. 15 deadline last week. The stakeholders include Frank Stronach, who purchased a share through a company controlled by The Stronach Group, and the owners of California Chrome, the top-rated horse in the world.

Rogers said that The Stronach Group plans to release additional details about the race in the near future, including the announcement of a television partner.

Ray Sousa More than 1 year ago
There's a good chance we get to the end of the season with horses going off form or injured . And maybe one big standout . What do they do then . Run gr3 horses .
Ray Sousa More than 1 year ago
He's the first to realize this is a bad concept. Very close already means he lost money . And time . 
Karl Deppen More than 1 year ago
Can't wait ! As a betting fan since 72 this is what the industry needs, excitement, something interesting between that long period between B.C. Day and the Ky.Derby. As soon as it was announced I made reservations for my trip South !!!!
Bruce Epstein More than 1 year ago
Stronachs history and "track record" is suspect at best.  GP home of winter racing offers lower than average purse
structure even with it's casino.   He purchased lots of second and third tier tracks and dumped them for a big loss.
It's nice to play with the public's money.  Folded co's to get out of debt, now he controls CA and FL racing.  Lets pray
Cuomo (NY gov.) doesn't let him buy NYRA.  Even though he let a toy store executive, with no racing background run it.  Stronach is not the answer.  PS anyone with any sense could make money during the SPA season.
Union_Rags More than 1 year ago
Never bet against FS.
Chas More than 1 year ago
Gee, what a surprise! Some one already 'bailing' on this 'Stronach pie in the sky' plan....and the only one who appears to be making on this is Kumin and Covello....not a big fan of Kumin, but, if he did an analysis of the structure of this concept like he does with his hedge fund business - then I take what he has stated also golden and wouldn't touch this race as an owner with a '10 ft pole' or an ' Amex Black Card'....
Expect this race to be history in 2 yrs. and the race formerly known as the Donn Handicap to be run as the $500,000 Pegasus Handicap going forward....
Anonymous More than 1 year ago
Sure I'm missing something here but all the reporting on this indicates that the entrants participate in the handle/takeout which would likely ensure a profit for all of them no matter where their horse finishes as the race should be well bet across the country. Looked online for a copy of agreement signed by participants but can't find it. Also wondering how takeout (net of what the ADWs will keep), which is normally tied to statutes of some kind in most states, is disbursed to entrants. The fact that these folks sold their entry makes me wonder what the actual terms of this agreement are.  The fact that Stronach was willing to buy unsold shares to get the race to go makes me wonder as well. 
Mike Reeves More than 1 year ago
Stronach Stables might have purchased their share to enable them to run their horse Shaman Ghost in the race. If the horse remains sound he should be competitive. 
David More than 1 year ago
They would need Kentucky Derby like handle to make a profit off the takeout. That's right around impossible. 

If they do the same business (single race) as the Breeders Cup Classic lat year, and we assume its all on track, which it wont be by a long shot, it would get them about 250K each ((15mil total handle *.2)/12) 

Using this years Kentucky Derby, and the same all on track wagering assumption, it would be about 1.8 million. Once you factor in ADWs as you noted, that number drops significantly. 

To make a profit, you need to run real well. They need it to become a popular thing as the TV rights and additional advertisements would be where they could make up the difference.