Thursday, March 5, 2009

A Closer Look at the Calder Sale Numbers

Given the economic climate, the Calder sale of two-year-olds in training yesterday could have been worse, but for most of the pinhookers and other sellers, it was bad enough.

The sale, always the most prestigious and most expensive juvenile auction, had a total of  272 horses in the catalog, the same number as last year.  But final figures show a total of 111 horses sold for gross receipts of $25.2 million.  That's 25% off last year's gross, and, because more horses were reported sold than the 102 in 2008, the average and median price declined by more, 31.5% for the average and 34.8% for the median, compared to published 2008 results. 

Boyd Browning, CEO of auction company Fasig-Tipton, was quoted in the Blood-Horse as saying that the sale "wasn't as bad as my worst fears, and it wasn't as good as I'd hoped for." In fact, if you look critically at the numbers, it was a good deal worse than appears on the surface, bad as that appearance is. At least three factors make the published results less than completely transparent.

First, Fasig-Tipton for the first time this year reported private sales made on the sales grounds and booked through the auction house as "sold" for purposes of the results totals.  It's common at sales for horses that fail to meet their reserve to be sold privately soon thereafter (usually at a discount off the final bid) as consignors weigh the risks of trying to take the horse home and sell it somewhere else. Often, these sales are processed by the auction company, which helps to assure the consignors that they're likely to get paid.  But, until this year, those horses had been reported as RNAs, which is, in fact, what they were.  By changing the reporting treatment, Fasig-Tipton was able to raise its total of horses sold from 102, the same as last year, to 111.  If Fasig-Tipton had stuck to the reporting methods of prior years, the Calder sale's buy-back rate this year would have been 40.7%, pretty much the same as last year's 40.4%.  Instead, by including the post-auction private sales in the totals, F-T was able to show a decline in the buy-back rate to a somewhat more respectable 35.4%.

Here's a comparison of the Calder results, adjusting the 2009 figures by taking out the horses that were reported as RNA's sold privately:

Sold:                 102 (same as in 2008)

RNA:                   70 (same as in 2008)

Buyback %:       40.7% (0.3% worse than in 2008)

Gross:               $25,226,000 (down 28.1% from 2008)

Average:            $247,313 (also down 28.1%)

(For those who want to check my arithmetic, or see if they can find even more anomalies, the horse-by-horse sales results are here.)

The differences from last year are not earthshaking, but if there's one thing we should have learned from the past year's financial turmoil, it's that we should insist on understanding the numbers produced by any company, and ensuring that when comparisons are made, those comparisons are truly of apples to apples.

The second reason for questioning the published results of the Calder sale is common to just about every horse auction: the key percentage that never gets reported in news of the sales is the percentage of the total catalog that is actually sold.  At Calder this year, there were 272 horses in the catalog, but only 172 of them even went through the auction ring; 100 were scratched before, or during, the sale.  So the true number of horses sold at Calder is 111 -- the 102 that were actually hammered down in the ring plus the nine RNA private sales. That's barely 40% of the horses that started out in the catalog.  True, some of the scratches were likely the result of injury, as happens even in the best of years, but, as has been happening all of this year’s sales, a lot of them were for economic reasons, as consignors realized they would be getting nowhere near the price they wanted and, rather than be embarrassed in the sales ring, began searching for other options.

Horses that failed to sell at Calder may get one more chance later in the sale season, but from now on, at the OBS sales in Ocala in March and April, at Barrett's in California in March, at Keeneland in April, and at Timonium in May, there aren't any second chances.  With nowhere else to go, it's likely that consignors will lower their reserves still further and make more post-auction private deals, with the result that average prices will be falling even further. 

The third factor that helped to keep Calder sale results respectable, if not great, was the very significant investment that Fasig-Tipton's new owners – a corporation called Synergy Ltd., which, if not outright owned by Sheik Mohammed, is closely associated with him -- made to treat prospective buyers well, including a new tent in the parking lot with areas for watching breeze videos, logging onto the internet, and, most important, eating. Free, and good, food provided by the auction house is a welcome addition to the sales scene.  Even more imprtant was the help that Fasig-Tipton provided to bring European and Japanese buyers to Calder, including paying some of their travel expenses.  These innovations, or, rather, borrowings from the best practices of auction companies in Europe, Asia and Australia, are a welcome addition to the auction scene (I'm waiting to see what Fasig-Tipton has in mind for the terminally gloomy sales pavilion at Timonium), but the greater than normal presence of foreign buyers as a result of Dubai's ownership of Fasig-Tipton and its willingness to spend money to make money probably did raise the Calder results above what they would otherwise have been.

Another sign of Dubai’s interest in having the sale go well was the presence, and strong purchasing, of bloodstock agent par excellence John Ferguson, who represents Sheikh Mohammed and related Dubai interests.  Ferguson was listed as buying six colts, including the only three horses that sold for $1 million or more at the sale. The six he bought averaged $865,833, close to four times the sale's overall average price of $235,595. 

Ferguson has been an important presence at the Calder sale for many years; he was the under-bidder in the infamous 2006 duel to acquire the then- and still-maiden The Green Monkey, who went to Demi O'Byrne of Coolmore for $16 million.  But one wonders whether Ferguson's spending spree this year was, at least in part, a result of Dubai's Synergy Ltd.'s purchase last year of the Fasig-Tipton auction company.  It would, to say the least, have been an embarrassment for Dubai's ruler had his newest acquisition in American racing failed miserably at one of its two flagship sales (the other is the Saratoga yearling sale in August).

The colts that Ferguson bought at Calder were very nice thoroughbreds, and had he not been there, they would have sold for serious money.  But perhaps not so serious as with his presence.  The other prospective buyer at the top of the market, Coolmore's O'Byrne, was conspicuous by his absence from the Calder sales results. Just a guess, but perhaps $1 million or so of the gross at Calder could have been the result of Ferguson's upholding the honor of his employer. 

Pinhookers were hit pretty badly by the Calder outcome, except for those lucky, or smart, enough to have the horses that John Ferguson wanted. Back last September, when the pinhookers were buying yearlings, prices were down only 10-15% from the previous year. Now they're down more than 30%. That has to squeeze the pinhookers' margins, and makes the outlooks for this coming summer's yearling sales even bleaker

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