The Inside Track by Altan Insights: July 25, 2021
Led by Brian Doxtator and Chase Chamberlin, Commonwealth is saddling-up and ready to reshape the horse racing industry by offering once-in-a-lifetime experiences; both on the track and in investment portfolios. Doxtator carries an impressive financial background that has helped Commonwealth navigate the often overwhelming Reg A atmosphere while Chamberlin, who was a multi-national equestrian champion, provides an exceptional level of equine knowledge. The combination of talented co-founders has helped turn Commonwealth into a major player at both the auction house and in racehorse investing.
Commonwealth x WinStar Farms
To help source, facilitate and train their top-tier offerings, Commonwealth has created a strategic partnership with the world-renowned WinStar Farm. Founded in 2000, WinStar has established itself as one of North America's leading racing and breeding operations. The farm has found incredible success in all facets of the industry, including winning some of the most coveted thoroughbred races in the world. In 2010, WinStar produced the Kentucky Derby winner Super Saver and the Belmont Stakes winner Drosselmeyer. WinStar has compounded their success with Tourist, the 2016 Breeders’ Cup Mile champion, and Battle of Midway, the 2017 Breeders’ Cup Dirt Mile victor.
The farm's attainments reached an apex in 2018, as WinStar made history campaigning the undefeated Triple Crown winner Justify. At the end of the season, Justify was honored as Horse of the Year and Champion 3-Year-Old Male for his remarkable achievements.
High-risk, high-reward is an understatement when describing the financial perspectives in horse racing. Studies conducted by the University of Kentucky found that less than half of all thoroughbred yearlings sold between 2001-2018 were profitable- signaling that even top-tier horses bred for racing are still more than likely going to lose money throughout their careers. Commonwealth is forthright with the risks involved in racehorse investing but also transparent with its distribution structure. Commonwealth investors are eligible to receive portions of their horse’s net earnings, whether from race purses, sales, or even future breeding earnings.
In an example of how investors can earn money from a racehorse on the track, the below reviews a sample distribution from their first offering, Country Grammer, based on his first-place finish in the G1 Hollywood Gold Cup.
There are no ongoing fees or expenses paid by the investor as those are pulled from the horse’s winnings. The price per share amount also includes 18 months of training and care costs which means more money can be distributed to shareholders in the first year and a half of racing.
Once a racehorse has crossed their final finish line, the best in the business move into the potentially lucrative life of breeding. Legendary horses such as Justify can command breeding fees between $150,000-$250,000 and can be sold to stud farms for tens of millions.
The most successful breeding stallions command stud fees over $100,000 and breed more than 100 mares per year. While all stud careers vary, the most successful stallions can continue breeding into their 20’s. In 2020, WinStar’s stallion Distorted Humor, who grossed $769,964 in lifetime earnings on the track, bred 65 mares at the age of 27.
Commonwealth sold out of their first offering, Country Grammer, in just over one hour, with 206 investors filling the IPO. The offering was initially opened to a select list of individuals who had indicated early interest in the Graded Stakes-winning 4-year-old but demand was so high that the IPO was quickly opened to the public, ensuring that anyone had the opportunity to invest. The CMNWLTH app is available around the world and Country Grammer’s IPO attracted investors from Australia, Canada, Spain, and New Zealand. Commonwealth also captivated multiple generations, with an age range of 18 to 86 years-old. Country Grammer is expected to return to the track on August 7th at the storied Whitney Stakes in Saratoga, New York.
The Live Offering
Sire: Orb (from Malibu Moon)
Dam: Latique (from Elusive Quality)
Trainer: George R. Arnold II
Commonwealth’s second offering, Biko, is currently live on their platform and open to investors. The three-year-old is the son of 2013 Kentucky Derby winner Orb and carries an impressive pedigree that features a combination of speed and strength. Biko will make his 2021 debut at Ellis Park on July 25th for the Maiden Special Weight. Once Biko has his racing legs under him, he is expected to work towards the Kentucky Downs; an all-turf meet with over $10 million in potential payouts. The early decision made by ownership and trainers to point Biko towards a career on turf could provide lucrative for investors. The soft and forgiving turf typically allows horses that run on it the opportunity to race more often and have extended careers. Biko is built well for a turf track with large hooves and a strong, lean upper build. In 2020, Biko was breezing four furlongs (approximately 800 meters or one half-mile) between 50-51 seconds. This summer he has been cruising that same distance in 48 seconds with his work at five furlongs also showing signs of improvement.
To further our coverage into this exciting new alternative asset startup, we sat down with Brian and Chase to discuss the backstory of Commonwealth, how their native technology will help propel their business forward, and what the future holds on and off the track.
How did the idea to start Commonwealth come about?
(Brian) is a classic car collector and in the summer of 2018, he saw a tent for Rally Rd at a car auction. At the time, Rally had recently launched and only had a few cars and a small user base. Having SEC experience, he pored through all of their documents on EDGAR, reverse engineered their business model, and started to apply it to other asset classes.
Horse racing jumped off the page because of the experience and access you get alongside the opportunity to earn a return on your investment. With horse racing, you could invest in something and also meet the team, meet the horse, and get access to events around the world.
What is the process of acquiring and then securitizing a horse?
Our world-class bloodstock team identifies and acquires quality racehorse or race prospects from around the world. We perform comprehensive veterinary examinations on each horse to make sure the horse is free of any defects that would limit its career or create problems down the road (exam includes heart scan, radiographs, and a throat scope to ensure proper breathing).
We then create a company whose only asset is the racehorse, qualify an offering through the SEC’s regulatory process, then split it into equity shares. We offer the equity shares on the CMNWLTH app where investors can purchase shares and build their stable. Then the fun begins! Investors will receive ongoing content, invites to see their horse race, access to the winner’s circle, and more.
4. Explain some of the ownership perks. What does investing in a racehorse through Commonwealth get an investor?
Commonwealth is more than an investment, it's a 365-day experience. Racedays are the highlight of any owner/investor. From the pre-race jitters watching your horse in the saddling paddock to the moment your heart starts to pound as the announcer calls “they’re in the gate.” There is nothing like cheering your horse down the stretch, watching them cross the wire and then meeting them in the winner’s circle with the rest of your friends. Win, lose or draw, you haven’t experienced a race day until you have a horse in the race.
But there is so much more to racing than just race days. We aim to bring users along for every step of the journey with ongoing stable updates including photos, videos, educational content and invitations to various parties and events. Horse racing has something for everybody and we aim to crack that open and make it more accessible.
How does Commonwealth differentiate from traditional racing syndicates or even the Reg A firms that currently offer investment opportunities in racehorses?
Technology, Technology, Technology. Every fractional player in horse racing is taking advantage of the new regulatory landscape with Reg A but only Commonwealth is using native UX to appeal to a wide audience that extends outside of horse racing. Commonwealth is the only native iOS app in the world that allows you to invest in racehorses.
While Commonwealth is just starting to execute its wider launch, we have been building scalable fractional investment tech for 2.5 years, including the sixth iteration of our core back-end and countless updates and iterations to our mobile and web front-end. Commonwealth is already the most advanced fractional product in horse racing, and we are about to set a rapid pace of new products and features coming out. This pace is possible because of the time and care we took to build things out the right way and set us up for speed.
After this first round of IPO’s, what does the future at Commonwealth look like?
For now, we are focused on scaling our tech and our stable. We are excited to offer a slate of six two-year-old racing prospects coming right on the heels of Biko and Country Grammer. The next round will include a range of talented young horses preparing to begin their careers such as Steinbeck, who was a $650,000 purchase at the Fasig Tipton Gulfstream Select sale in Miami. After that round the stable-build continues with another 5-10 offerings right behind those. The rest of 2021 is all about users, horses, and racing. We have thrown some really fun parties but with all of these horses coming we will be throwing more events and getting out there to meet our owners and continue building the most fun racing team in the world!
Interested investors can visit https://www.joincommonwealth.com/ for more information or download their iOS app to invest today! Be on the lookout for more content involving Commonwealth at altaninsights.com and @altaninsights on Twitter!
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