Maltese horse racing owner Steve Farrugia was reported by the Maltese Press to have paid a record €740,000 for Nodessa Josselyn, a yearling trotter daughter of two Prix D’Amerique.  It was said to be the highest amount paid for a yearling trotter in the history of horse racing in Europe.  The previous record at the Argana Yearling Sales was €400,000 paid for Hunter Valley in 2018.

Farrugia was determined to secure Nodessa Joselyn whose pedigree he described as “the stuff of dreams”.  Trainer Vincent Martens was left speechless at the successful bid.  “It’s a great honour to take part in this adventure. She’s a unique being, we had to pay the price. I hope she’ll do well in the race.” 

Farrugia’s representatives at the Sales had originally been given a limit of €600,000 but the Maltese horse-owner, who was in constant touch with the auction hall, kept increasing his bids until he secured the yearling.  It is most unlikely that Nodessa will ever race in Malta; the plan is to have the horse compete in France, possibly at the Prix d’Amerique race.

Nodessa Josselyn is the daughter of two legendary horses in Ready Cash and Bellina Josselyn.  Ready Cash won 40 of 70 races and had a lifetime earning of €4,282,300, while Bellina Josselyn is also a Prix D’Amerique winner and boasts a lifetime earning of €2,686,170.

Will Farrugia ever recoup his investment?  Whilst one can make money from owning a racehorse, the reality is that most horses actually cost their owners money rather than making them any.  But that doesn’t stop people from getting involved in the world of racehorseownership. It is worth noting, of course, that there is something of a difference between owning a horse that wins and one that doesn’t.

The idea of owning a racehorse seems like a glamorous and exciting thing to do.  Actually, a fast-growing group of UHNWIs [ultra-high net worth individuals] millennials is being attracted to the market.  Posh horseracing, with its top hat and tails dress code and free-flowing champagne, seems to be a natural fit for wealthy young people   ̶   tiktokers, instagrammers and influencers   ̶   who like to boast about their privileged lives on social media.  It is estimated that in the coming 20 years some $70 trillion will pass from an older generation to their children.

“There’s nothing quite like the thrill of ownership,” says Henry Beeby, the chief executive of the thoroughbred racehorse auctioneers Goffs.  “There’s nothing like seeing your horse and your jockey in your colours on the track, and – my word – if it happens to win, you can share that joy with your friends.”  At last year’s sale, Beeby sold 11 horses for a total of £3.8m   ̶   some of the firm’s biggest buyers were in their early 20s.

What has made it easier for these younger people to enter the market is the rise of fractional ownership, which is an arrangement that is normally associated with ownership of executive aircraft.  For example, a 22-year-old business University student invested £3,700 in Corach Rambler as part of a seven-strong syndicate in 2020.  The 10-year-old Irish-bred thoroughbred won last year’s Grand National and was the favourite to win this year’s race.  Sadly for the student, his colleagues and many others betting on the former champion, Corach Rambler unseated his jockey at the first fence and failed to finish.

In a syndicate, one can buy shares for around $100 or less giving a member a 0.01 percent stake in the horse. A 1 percent stake will typically run closer to $10,000.  For example, shares of Balletic, a 2-year-old fully trained by hall of fame trainer Todd Pletcher, were available in 2022 starting at $80 for a 0.01 percent stake. One can also purchase interests in horses through partnerships sold by well-established stables. The shares approach also enables likely owners to spread their money across multiple horses, possibly increasing the chances of earning a payout.

The prevalence of syndicate membership has grown in recent years, largely thanks to the fact that it gives people the ability to get the benefits of racehorse ownership without the cost of doing so on your own. Benefits such as receiving Owners and Trainers badges, or exclusive trips to trainers’ yards, also play a part in the decision to become part of a syndicate or to own a horse outright.

Sole ownership is perhaps the manner of owning a racehorse that is indeed limited to those with an excess of disposable income, presumably like Farrugia. Owning a horse allows the owner to make all of the decisions in terms of the trainer that he works with and the races that they enter, as well as to claim all of the prize money for himself.

Millions of dollars are available in prize money each year for racehorses. The prize money at this year’s Kentucky Derby alone was $5 million, with the winner taking home $3.1 million. Remember, though, only one horse wins that race out of the thousands that are bought at auctions with hopes for major racing success. Meanwhile, whether one wins or not, there are all those bills for the jockey, the stable, moving the horse to the various races, the veterinary, etc that have to be paid by the sole owner or owners.  Owners can expect to spend between $30,000 and $50,000 per horse annually on these costs, according to Horse Racing Sense   ̶   a blog devoted to the horse industry. Trainers typically charge day rates, which can run between $60 and $120 or even more, depending on the person and facility.

Most racehorse owners have deep pockets or come from families with long histories in the sport. The late Queen Elizabeth II was a huge horse racing fan and members of the British royal family own several horses that compete. Similarly, Dubai’s royal family also own horses that have won many races all over the world.

Anybody out there reading this who might be interested?  If it is the case, then you might want to contact Kentucky-based Keeneland, which is one of the most prestigious thoroughbred auction houses in the world and conducts several auctions each year. At lasty year’s yearling auction, Keeneland sold 2,900 horses for an average price of $141,489. The most expensive horse was purchased for $3 million.

Costs can vary depending on the age of the horse and whether it’s already achieved success in racing. Yearlings are generally cheaper than 2-year-olds because as the horses age, it becomes easier to determine whether they’re likely to have racing success. Prices decline for older horses who are past their racing primes, but some could have significant value as studs. The most successful horses can earn a lot in those fees because investors hope the horse’s pedigree will produce more winners in the future.

Horse racing is sometimes referred to as the sport of kings, so investing in it can make the owner feel like royalty. The risks involved, though, are high and the odds for success are long.  If one is fortunate enough to make it big, one can also earn money in the form of breeding fees once the horse is no longer racing.

Fusaichi Pegasus, who won the Kentucky Derby in 2000, was sold for between $60 million and $70 million and initially commanded stud fees of $200,000 to breed, reduced to just $7,500 in 2020, according to Horse Racing Sense.  2015 Triple Crown winner American Pharoah reportedly earns a stud fee of $200,000, while Tapit, who has sired horses that have gone on to earn more than $198 million in racetrack earnings, gets $300,000 for breeding. Bred horses gradually lose their breeding ability the more offspring they produce, while so-called Genesis breed horses have unlimited breeding ability.

Of course, owners have to pay taxes on any income they earn as a result of racehorse investments. The Inland Revenue rules on investments may not allow owners to deduct losses they generate if the investment is classified as “passive”, that is if the horse is owned only for one’s personal pleasure or as a hobby.  The tax deductions only apply if the investment is a “legitimate business investment”.

If the hypothetical horse-owner out there does not want any of these risks or hastle, there is another option.  They can join a growing segment of people who have shown interest in digital horse racing. Now there are platforms like Zed Run which use virtual horses that are NFTs, or non-fungible tokens, where the owners can compete in simulated races and even breed their horses as a way to earn money. The races are based on an algorithm that generates 10,000 different random races and then chooses one for that specific race.

These digital horses can be purchased on the platform using cryptocurrency.  You can find plenty of horses for less than $50, while others will cost millions. Races, which can be entered for small fees, are run several times throughout the day. Some think digital horse racing will be the first major sport in the metaverse.

Coming back to Farrugia, according to Racing Factors in the last five years he has had four horses   ̶   Judopock, Kompany Vincent, Ibis Quick, and Django du Bocaje  ̶   in 20 races, of which he won four, had a placing in five, and lost 11.  However, last year was apparently a disaster   ̶   he ran his horse Django du Bocaje in five races and lost all five.  If one looks at all his racing activity, he had four horses in 25 races, of which he won seven, had placings in five, and lost 13. 

It seems that the Maltese horse-owner has become more ambitious.  Obviously, we all wish him well.

Main photo: Nodessa Josselyn (Le Trot)