Crowd-funding group seeks Pegasus World Cup berth
A newly established crowd-funding group has begun soliciting interest from potential investors in a bid to buy a slot in the $12 million Pegasus World Cup, the owner-funded race scheduled for Jan. 28 at Gulfstream Park in Florida.
The company, led by former Thoroughbred owner Jim McDonald, launched a site Tuesday that allows potential investors to indicate how much they might consider contributing to the effort, from a minimum of $250 to a maximum of $10,000.
The offering is the first concrete expression of interest from any entity in securing one of the 12 slots already sold to stakeholders in the Pegasus, which could be the richest race ever run. Each initial Pegasus stakeholder has paid $200,000 as a deposit on the $1 million slot, which entitles the owner to nominate two horses to the race and share in several revenue sources tied to it. Under the unique conditions of the race, the slots or portions of the slots can be sold to other partners.
McDonald, 63, said he could not provide a specific threshold of interest that would lead the group to pursue a formal offering. The company, ALTZ, intends to keep the interest period open for “several weeks,” McDonald said, at which time it will decide whether to pursue a formal registration of the offering with the Securities and Exchange Commission, a process that can take “120 days or more,” he said.
The offering is one of a number of racing-related crowd-funding projects to be launched since the SEC released regulations regarding the investments earlier this year. Congress passed legislation removing many restrictions on offering equity to small investors in 2012 as a way to legalize Internet-based crowd-funding projects, but it took the SEC four years to formally approve regulations governing the new investment vehicles, which are considered extremely risky.
McDonald said the vehicle likely would seek to purchase a slot in the race along with its “right of first refusal” attached because he believes the Pegasus will become a major race in the future. Each of the initial stakeholders in the race received a right of first refusal to purchase a slot in the 2018 race, and those rights are expected to be marketable.
“There’s a lot of upside to this,” McDonald said.
Many of the stakeholders in the race have said they do not expect to be able to sell their slots at a profit this year, citing the novelty of the race and the expectation that each share of the race’s revenue will not amount to more than approximately $100,000.
The Pegasus vehicle is the first crowd-funding project for ALTZ, McDonald said. ALTZ will collect an estimated “1 to 2 percent” annual fee from the investors, with the fee based on assets, McDonald said. ALTZ will also take its own equity stake in the vehicle, according to McDonald.
The company has retained several racing participants as advisers, including Eclipse Award-winning trainer Todd Pletcher. On Wednesday, Pletcher, who first met McDonald in the 1990s when he co-owned several horses trained by Pletcher’s mentor, D. Wayne Lukas, said that he expects to advise the group on which horses might be good targets for the Pegasus, should the group get that far.
“It would be a pretty simple role for me,” Pletcher said. “I told Jim I’d help out in any way I could.”