Benefits for buyers of racehorse shares

We are passionate about connecting owners and trainers to race horses together. We are equally passionate about increasing the professionalism and integrity of financial transactions relating to the sale of shares in racehorses, and avoiding disputes and arguments between co-owners and the trainer during the career of their horse.

For that reason we undertook the process to earn an Australian Financial Services Licence (AFSL) with the Australian Securities & Investments Commission (ASIC). This is effectively the same licence that stock brokers and financial advisers need to have in order to deal in stock exchange shares and provide advice, although our licence limits us to the dealing in racehorses of course.

We are also proud of our independence. Rather than buying young horses ourselves and then selling shares in those horses for profit on ongoing management fees, we prefer to provide a fixed fee service to help trainers sell shares in their horses, and buyers find the right horse and stable to join. This independent service supports buyers with:

  • disclosure & transparency via a Product Disclosure Statement (PDS) that meets the conditions set out by the Australian Securities Investment Commission (ASIC);
  • security and receipt of clear title free of encumbrances;
  • clear agreement with other co-owners relating to the colours the horse will race in, the handling of trophies if won, and management of decisions that are often required;
  • confidence that the identities of your co-owners have been verified, they are eligible to be owners, they are not on any fraudulent activity registers or crime watch lists;
  • no ongoing management fees.

The conveyancing of clear title is particularly important to secure a buyer’s initial investment. There is risk when purchasing racehorse shares from a Seller (e.g. a trainer or bloodstock agent selling shares) who is yet to pay the Vendor from whom they purchased the horse (e.g. Inglis, Magic Millions, New Zealand Bloodstock).

If the Seller still owes money on the horse they purchased, the auction houses mentioned will hold a security interest over that horse, registered on the Personal Properties Securities Register (PPSR). In other words, if the horse is not paid for in a suitable time period, the auction house can legally repossess the horse.

Buyers who pay a Seller directly for a share in a horse that the Seller has not yet paid the Vendor for, do not own clear title to their share in the horse. An invoice provided by the Seller is inadequate if another party holds a security interest over the horse.

Here are some scenarios where a horse can be repossessed, resulting in buyers of shares who paid the Seller directly having no right of ownership nor a right to a refund.

  • the Seller uses sale proceeds to fund their business or pay for other horses purchased and cannot pay for the horse in full;
  • the Seller declares bankruptcy;
  • the Seller is charged and disqualified by racing authorities;
  • the Seller’s assets are frozen by authorities or a court order.

Whilst we know the vast majority of trainers and bloodstock agents are not acting suspiciously or purposefully misleading buyers, this consumer risk is unnecessary. It is precisely the reason why regulations were put in place firstly by ASIC and secondly by each state’s Principle Racing Authority acting as ASIC’s appointed Lead Regulator.

When you purchase a house, you always engage a lawyer or conveyancer. Buying a horse or shares in a horse should be no different.

On behalf of trainers (Sellers of the horse), we process all applications to purchase a share and hold all application monies in an account separate from our business account and from the trainer’s. We call this a “trust” account, and it operates the same was as a Conveyancer’s trust account operates in the sale transaction of a house.

Upon sale of all shares in the horse, or earlier of the trainer decides to retain ownership, we release funds from that trust account to Creditors first, if any, and ensure the whole of the horse has been paid for in full. This ensures that all co-owners receive clear title free of any claims, rights or encumbrances, with any security interest on the horse removed from the Personal Properties Securities Register (PPSR).

Ask your trainer for a PDS and Conveyancing Service for piece of mind and maximum security.

Kinematic Thoroughbred Services Pty Ltd holds Australian Financial Services Licence (AFSL) number 452499. We are authorised by ASIC and Principle Racing Authorities (PRAs) to sell shares in racehorses and provide general advice on such schemes.

Read more articles about our business: What We Do | Racehorse Ownership Guide | Identity Verification and AML/CRL Compliance | Future Proof Your Sales & Marketing