JC / Railbird

Transparency Not Apparent

An ownership depository, available only to registered buyers and agents who provide personal identification and sign a confidentiality agreement, didn’t garner a single request for information from any bidders at the Fasig-Tipton July sale:

Van Clief acknowledged that the ownership repository — whose existence was listed in Fasig-Tipton’s conditions of sale as the 20th condition, “Transparency in Ownership,” as well as announcement from the auctioneer’s stand — might not have been obvious to buyers.

Sure, a lack of obviousness could have been a problem, or it could have been the hassle involved in gaining access to the information. I don’t follow sales assiduously or know enough about that aspect of the industry to comment with any confidence, but it does seem odd that the ownership of every animal entered for sale wouldn’t be fully, openly disclosed. Perhaps Kerry at Thoroughbred Brief, who expertly explained the role of equine lenders in sales in a recent post, could illuminate why the opacity someday.


Yeah, that’s a whole other can of worms. It’s been custom for a long time in the horse industry, especially in the KY auctions, to not require disclosure of ownership, because it can affect price, among other things. Then you also have the time-worn tradition of being able to let your agent bid up the price on your horse, let your agent buy a horse from your own partnership without disclosure, etc. Also, there are many dual agency problems that arise, which the industry seemed pretty OK with (hey, everyone’s making money, right?) until newcomers started getting screwed over by the process. That’s why we saw Jess Jackson, a Californian, introducing a bill into the Kentucky legislature dealing with the dual agency problem. I’m going to stop yammering now before I stop making sense. Thanks for pointing the article out, though, I hadn’t picked up on that. If nothing else, it’s just a sign that the industry does not openly embrace change.

Posted by Kerry on July 22, 2008 @ 11:52 pm

Kerry, thanks for the comment. If sellers are concerned that disclosure can affect price, I assume that means they fear negative repercussions to the information being made available. Doesn’t hiding it then distort the market?

Posted by Jessica on July 23, 2008 @ 8:38 am

Yeah, the market gets distorted by lots of inefficiency, like ‘by-bidders’ bidding up their own horses, or horses “selling” for a specific amount on the block, when in reality they’ve already been sold for a lower amount behind the scenes. That’s the theory circulating about The Green Monkey, for instance.
Anyway, for a much better description of practices, etc., check this out and start on page 9 of the pdf; I promise it’s not too boring!

Posted by Kerry on July 23, 2008 @ 10:12 am

Terrific link, not boring at all. I’m struck by the assertion that up to half of all auction prices don’t reflect true sale prices. Do tell about the Green Monkey — is there a rumored “real” price being bandied about?

Posted by Jessica on July 23, 2008 @ 10:03 pm

I remember reading the rumor on the COTH boards a while back, so I’ll look it up this evening, but I believe the price was under $10 million at least. The idea is that he was sold before the auction, but that the parties agreed to drive up the price in a show of machismo to prove they could win a bidding war with the sheiks. Of course, Keeneland doesn’t mind this at all, because they would still have to pay the percentage commission on the actual price when the hammer fell.
Again, this is just a rumor, but knowing this kind of thing happens a lot gives it some credibility (as does the fact that someone would pay, what was it, $16.3 million, for an unraced 2-year-old is nuts).

Posted by Kerry on July 24, 2008 @ 9:18 am