Frank Stronach, entrepreneur, horse owner and founder of one of Canada’s most successful companies, is returning to the public markets, offering investors a new way to play the ponies.
Mr. Stronach, who sold almost his entire stake in Magna International Inc., the auto parts giant he founded in 1957, and resigned as chairman of that company and real estate firm MI Developments Inc. last year, is seeking investors in six companies that will own 20 thoroughbreds each.
Each of the six bears the name of a successful Stronach horse, such as Awesome Again Racing Corp. and Red Bullet Racing Corp., and each has purchased 20 thoroughbreds from The Alpen House Racing ULC, a private company controlled by Mr. Stronach, who is one of the largest and most successful owners of race horses in North America.
The potential payoff for investors will come in 2014, when all the horses will be sold as three-year-olds eligible to run in the most lucrative thoroughbred races – the Kentucky Derby, Preakness and Belmont Stakes, the three races that make up the Triple Crown. Mr. Stronach’s Red Bullet won the Preakness in 2000.
He plans to sell 405,000 shares in each of the companies for $10 (U.S.) a share, according to filings each of the six companies has made with the U.S. Securities and Exchange Commission.
If the deals go ahead, the 79-year-old Mr. Stronach will return to an arena in which he battled with investors over decades as chairman and controlling shareholder of Magna and MI Developments. He is also a vocal critic of institutional investors, stock market regulators and the government entities that regulate the horse racing industry.
In addition to being an owner and breeder of horses, Mr. Stronach was the founder and controlling shareholder of Magna Entertainment Corp., a company that owned and operated some storied U.S. racetracks, but tumbled into Chapter 11 bankruptcy protection in 2008.
Mr. Stronach now owns several former Magna Entertainment tracks privately, including Gulfstream Park near Miami and Santa Anita Park near Los Angeles. Those two will be the preferred sites for races in which the horses owned by the six companies will participate.
The bet is that the horses, which were purchased in 2010 as yearlings and will be trained by another entity affiliated with Mr. Stronach, will have increased in value substantially by the time they are three-year-olds in 2014, the SEC filings show.
A limited number of trained three-year-old thoroughbreds come on the market annually, the filings said, noting that trained horses are a less risky proposition in the racing business than untrained horses.
The filings also warn that horse racing is a declining business and that investing in horses is not for the faint of heart or small of wallet. They added that the companies will take the unusual step of requiring investors to show that their total investments in the stock offerings by the six companies do not represent more than 10 per cent of their net worth.
“Investing in thoroughbred racehorses is a speculative activity and the most frequent financial outcome from ownership of a thoroughbred racehorse or an equity interest in a thoroughbred racehorse is the partial or total loss of invested capital,” said the registration statement for Awesome Again Racing.
The filing also noted that the industry’s core fan base is shrinking, the number of races has fallen and wagering on thoroughbreds alone in the United States and Canada tumbled to $11.9-billion in 2010 from a peak of $15.7-billion in 2003.