IRON, International Racehorse Owners Network, has engaged 33 prominent investors from Australia and Hong Kong to back a syndicate which intends to buy up to eight horses at the Riverside Stables this week.
It will feature a world-first model of ownership, with the horses then forming part of an asset pool which can be tokenised for listing on a digital exchange. Subsequent investors in the tokens would not be trading bloodstock, but effectively holding shares in the future prosperity of a selection of horses.
Boehm, a successful businessman in Hong Kong, explained to TDN AusNZ from his current base in Thailand that he had been working closely with Hong Kong-based QBN Capital on the increasingly popular concept of tokenising assets, something that has become possible through the use of blockchain, and the emergence of powerhouse cryptocurrencies such as Bitcoin.
"The tokenisation of assets would apply to anything that might not be easily traded through regular means, like real estate for example," he said.
"We were sitting around in Hong Kong thinking about what asset category would be good to tokenise first. We thought about racehorses, because Hong Kong people are generally very interested in horse racing and there is a lot of excitement and money around it.
"We were sitting around in Hong Kong thinking about what asset category would be good to tokenise first. We thought about racehorses." - David Boehm
"Given that we had the infrastructure and the experience to deal with racehorses, we thought we would give it a go. We put together a proposal whereby the idea is that we will have 33 general partners and these general partners are the people who put in the money initially and we can hopefully buy yearlings at the Easter Sale."
David Boehm (left)
From there, the plan is for those 33 investors to remain in the ownership of the horses, thus satisfying any regulatory concerns from racing authorities, but they will effectively sell the future prosperity or otherwise of the horses in their ownership.
"So we won't actually tokenise the racehorses themselves, we will tokenise the financial benefits of those racehorses," Boehm said.
"The 33 initial investors will retain 10 per cent of the financial benefit and we will tokenise the other 90 per cent. It's just like owning a horse except the ownership document doesn't change.
"There are a few avenues for financial upside. There is prizemoney earned, or if we sell a horse or if we are lucky enough to find a colt that might be worthy of syndication as a stallion, they will get the benefits of that as well."
Moore to the fore in the IRON's plans
Investors in the tokens will be buying a share in the future of all horses within the ownership of that particular syndicate, with horses to be trained either by Moore from his new Gold Coast base, or by champion Sydney-based trainer Chris Waller.
Moore's involvement with IRON will be to select the yearlings on which the syndicate will bid on this week in Sydney.
"My position in the whole thing is to buy the horses and they will then go on to Muskoka Farm, which David owns," Moore told TDN AusNZ. "The syndicate then decides who trains them, there might be a few in Sydney, and I’ll train a couple up on the Gold Coast."
"My position in the whole thing is to buy the horses and they will then go on to Muskoka Farm, which David owns." - John Moore
Moore, who will train under his own name in Queensland, is excited by the concept, and intends to buy around eight horses for IRON, with a mix of fillies and colts.
"The plan is for all these horses to race in Australia. George (son) and I have done all the selection process and I will have some input on who will train the horses in Sydney. This is something very new to the industry," he said.
Muskoka Farm
A world first
Boehm said the prizemoney levels and returns to owners in Australia made it the ideal place to start up the IRON model, even though the tokens themselves will likely be listed on a digital exchange in London due to a lack of such a platform in Australia.
"We will focus on Australia because we have infrastructure there, but in the future we could look to do it in any jurisdiction," he said.
"As far as we know we are the first group that will be doing this in a formal way. Others may be trying bits and pieces, but I think we are the first to have the intention to buy racehorses and put them into stables.
"Once the horses have been purchased, we set up a corporate structure whereby 100 per cent of the financial benefits go into the structure and then we issue tokens. It’s quite similar to doing an IPO for a company on the stock exchange." - David Boehm
"Once the horses have been purchased, we set up a corporate structure whereby 100 per cent of the financial benefits go into the structure and then we issue tokens. It’s quite similar to doing an IPO for a company on the stock exchange.
"We draw up what is called a STO, the digital equivalent of an IPO. The tokens will be listed on a digital exchange, probably in London, because the infrastructure there is quite advanced, some time later in the year."
Transparency and traceability
Such a radical model is likely to draw scepticism within the thoroughbred industry, as well as the attention of regulators. But having enlisted some significant investors, Boehm has already sought assurances that the ownership model would not be an issue.
"There is of course a requirement of regulatory authorities in horseracing to be able to see the ownership. We're going to set up a syndicate or a fund, that will buy these horses and they will all be owned by the 33 partners, who will be fully disclosed. If the regulatory authorities want to know who is behind it, we will just provide them with the shareholders' information," he said.
"We've been in touch with Racing NSW and the biggest issue with the racing authorities is transparency. As long as they know who is in the ownership of the horses, then they are comfortable with it.
"And because the financial authorities in the UK and Hong Kong are making sure that everything is done in a transparent, open and audited way, the reputation risk is eliminated. The great thing about blockchain is everything can be traced."
James, Gary, John and George Moore, James Ferguson | Image courtesy of Inglis
While the finer details may take some getting your head around, Boehm believes the concept has the power to win potential investors in the digital tokens over, not just for the financial returns, but for the engagement as well.
"The reason why I love the concept is that in most racing jurisdictions around the world, we want to compete with all other entertainment options. Younger people are doing everything online and digital is very important to them and so we feel that by tokenising the financial benefits of these racehorses, we are going to get a lot of young people interested in sport again," he said.
Moore kept busy
The additional work Moore has done through inspection periods in identifying prospects for the IRON syndicate as well as for his own developing stables has made for a very busy few weeks for the 71-year-old, but he is relishing the challenge.
"This is the first time I have done three or four days in the Hunter Valley with George and the first time I've looked at 400 horses ahead of the one sale. It’s been very intense, but it’s been very worthwhile," he said.
He intends to buy between two and six horses for his own clients at the Riverside Stables.
"There are some very nice horses and I look forward to building on what we already have bought this year," he said.
"The market is very hot. It will be interesting to see what the average is going to be like."
While he has a lifetime experience in preparing horses, Moore said is enjoying learning all he can about his new home.
"It's been good to get to meet everybody again and to touch base with all the stud manager's and owners, all the way across the board. That's important," he said.
"I'm trying to get a good feel for the racing culture of Australia and in particular, Queensland, so I'm not looking to establish a huge stable. I want to get my feet on the ground and establish a stable that is winning races."
