What Can Big Brown Do For You?

So if you owned Big Brown and someone offered you some nice coin ahead of the Preakness, would you sell? The owners apparently said yes. This, from Darren Rovell.

Michael Iavarone and Rich Schiavo of International Equine Acquisitions Holdings are looking pretty smart right now.

They bought a 75 percent piece of Big Brown for $2.5 million last year and on the way to Pimlico for the Preakness on Saturday signed the papers to sell the breeding rights to the horse for a reported sum worth more than $50 million.

Sounds like a bad move in hindsight, no? Well, not so sure.

First, let's appreciate how big their bet to buy Big Brown was. Consider that Real Quiet, who won the first two legs in 1998, was purchased for $17,000. That Funny Cide and Smarty Jones, who also went to Belmont with hopes of winning the Triple Crown, were purchased for $75,000 and $17,500.

Now, let's talk about what was on the table for them. Iavarone and Schiavo aren't saying what the total price is, but let's just go with the $50 million for now. If that's the price, that's $10 million more (about $5 million more, factoring in inflation) than the appraised value of Smarty Jones--Three Chimneys farm bought half of his breeding rights for $20 million in 2004.

Factoring in inflation, that's also $29 million more than what was paid for the breeding rights for the 2002 Derby and Preakness winner War Emblem. And keep in mind, that's before Big Brown won the Preakness.

And also keep in mind that War Emblem turned out not so fond of the Ladies. Not to mention Barbaro's post-Preakness demise.

Is there less than meets the eye here? My resident horse expert Kevin Depew suggests a whole lot of misdirection involved in that "headline" of $50 million. Remember, this is a horse hedge fund trying to raise funds. "Like all things financial, they put a number on it so they could show it on the books, but it's smoke and mirrors".

It's a bit analogous to NFL contracts that get routinely overstated. The top line of the story is the total $$ package, but the more relevant number is the guarantee to the player. A 7 year, $50 million deal may really be a front loaded bonus and backloaded big payday that never happens. 

Details of this one remain murky.