07/15/2016 9:50AM

Simon: Feast or famine for consignors in current auction climate


The stock market is near an all-time high, purses on average have never been better, and handle on racing is finally showing stability after years of declines.

These factors should have positively affected the commercial auction market for racing prospects; instead, Fasig-Tipton Kentucky’s yearling sale last Tuesday cast a wet blanket on things. The sale recorded an unusually high 37.5 percent buyback rate, total receipts were down, the average price was down, and the median price declined.

So, what happened?

The problem at Fasig-Tipton has been prevalent at auctions for more than a decade: Buyers seem to be “on” the same horses – those with the best physical appearance and conformation and with the fewest problems in the vetting process, including radiographs. Such yearlings command the lion’s share of attention and money; others fall by the wayside. It has been feast or famine for consignors, a difficult climate for those who try to make a living selling horses.

Even so, and despite the buybacks, Fasig-Tipton July was good for a lot of horses – that is, if you had the right one.

According to data published by The Blood-Horse, 64 percent of the horses reported as sold made a profit for their owners. The Blood-Horse calculates profitability as two times the stud fee in the year of conception for the yearling (2014), plus $20,000 in costs for raising the foal to sales age. That is not too far removed from the old rule of thumb that a yearling has to sell for three times the stud fee to make a profit. The expenses of getting a yearling to market include the stud fee, cost of the mare, cost of raising the foal, cost of boarding the mare/foal year-round, and sales commission.

That 64 percent profitability rate is pretty good for a yearling sale. When the Thoroughbred Times studied profitability at yearling auctions, it was found that in any given year, only about 25 percent of yearlings made money for their sellers. For those who look at yearling averages at a particular sale and think that everyone is making money, think again.

So, if 64 percent of yearlings are making a profit for their consignors, it’s a decent sale for a lot of people, but those who took a yearling home after it failed to meet its reserve likely have a different take.

What the numbers also say is that too many consignors are buying back their stock for whatever reason – whether they have too much invested in the yearling, disagree with the market assessment, or are willing to gamble on either selling the horse at a sale of 2-year-olds in training or keeping it to race.

One factor that plays a large part in the decision to buy back a yearling is the stud fee, and when fees get to high levels, as they are today, commercial breeders find it more difficult to sell their yearlings for profit.

Having too much invested in a yearling also can be due to the cost of a mare, and in today’s commercial market, there is strong demand for good-to-great pedigrees. It is a high-risk, high-reward game for both buyer and seller.

At Fasig-Tipton, there were some good examples of how the cost of the mare played a large role in whether a yearling was sold or taken home. Two yearling colts by Tapit were offered, with vastly different backgrounds and sale outcomes.

One son of Tapit sold for $450,000, the second-highest price of the sale, while the other was bought back for $355,000, which would have made him the third-highest-priced yearling.

The colt who sold was out of the young Bluegrass Cat mare Ithinkisawapudycat and was consigned by Ashview Farm as agent. Ashview had purchased Ithinkisawapudycat at the 2012 Keeneland November breeding stock sale for $250,000 while a maiden mare. She was stakes-placed, is a half-sister to Canadian champion Spring in the Air, and hails from the immediate family of Grade/Group 2 winners Tejano Run and More Royal. In other words, there was plenty of black type to fill his catalog page.

When Ashview sent its mare to Tapit in 2014, his fee was $150,000, and while they arguably may have been overbreeding her, the choice proved prescient as Tapit developed into the top commercial stallion in North America, with a current fee of $300,000. Getting three times that 2014 stud fee for the son of a mare who cost $250,000 was a good deal for Ashview. (Even more impressive, after buying Ithinkisawapudycat, Ashview bred her to Tapit for $125,000 in 2013 and sold the resulting filly as a weanling for $750,000 at the 2014 Keeneland November sale.)

Then there’s the case of the $355,000 Tapit buyback.

Grade 1 Prioress winner Lighthouse Bay, the dam of that yearling, was purchased by Newgate Farm for $1.2 million in foal to Tapit at the 2014 Fasig-Tipton Kentucky November sale, so the operation had some $800,000 more invested in her than Ashview had in Ithinkisawapudycat when taking into account the $150,000 fee she was carrying. (Lighthouse Bay, in fact, was bought back for $850,000 in foal to Medaglia d’Oro at Keeneland’s 2015 November sale.)

While Lighthouse Bay was herself a good runner, she is light on pedigree. The daughter of Speightstown is the only stakes winner in three dams on the catalog page; the fourth dam was a minor stakes winner at Bay Meadows who never produced a black-type horse.

And the funny thing about racing – or baffling, infuriating, or dumbfounding – is that no one knows which of those Tapit colts will turn out to be the better racehorse. You take in all the information and do your best, but it’s really just a game of odds.

There are no guarantees in the sales ring.

The only way to really tell the bargains from the busts at this recent Fasig-Tipton sale is to wait two or three years and take a look back.