March 17 (Bloomberg) -- On a chilly evening in December, a 5-year-old mare named Dancing Rain clip-clopped into the ring at Tattersalls, the auction house in Newmarket, England, where buyers of thoroughbred horses from all over the world descend to part with their millions.
A silence fell on the standing-room-only crowd as Dancing Rain strutted her stuff, with a Lot No. 1533 sticker slapped on her hip. She wasn’t alone, Bloomberg Pursuits magazine will report in its Spring 2014 issue: Her stomach bulged with the evidence that she was nine months pregnant by Frankel, the stallion many regard as the greatest racehorse to hit the track in the last half century.
Just two years earlier, Dancing Rain had burst through the gates at Epsom Downs Racecourse, seized an early lead and never let go, overcoming 20–1 odds to triumph at the Investec Oaks, one of Britain’s top five races.
At Tattersalls, she was the first Oaks winner pregnant with her first foal to be auctioned in 50 years. Her owners, brothers Lee and Martin Taylor, London lawyers and relative newcomers to the world of horse racing, were about to see their ship come in.
“Amazing presence and special to be around,” Tattersalls Chairman Edmond Mahony repeated rhythmically from the wooden podium while scanning the crowd for bidders.
Bidding opened at 2 million guineas, or 2.1 million pounds. (Horses in England are still priced at auction using an antique monetary unit worth 5 pence more than a pound.) Offers quickly spiraled to over 3 million guineas before Pinar Araci, daughter of Turkish industrialist Ibrahim Araci, offered 3.9 million guineas.
As the bidding wound down, Mahony caught the eye of a man in a green-felt hat standing at the crowded entrance with a mobile phone to his ear -- who promptly bid a decisive 4.2 million pounds ($6.9 million).
“Sold to John Ferguson for 4 million guineas!” Mahony declared as his hammer went down. Ferguson had bought on behalf of Sheikh Mohammed bin Rashid Al Maktoum, the ruler of Dubai and the owner of Darley Stud, one of the two largest thoroughbred operations in the world.
The sale of Dancing Rain is just the latest sign that the bloodstock business is booming. Buyers forked over 66 million pounds at the December sales, contributing to a 52 percent rise in the average price of a broodmare from last year.
In the past, the trading of horseflesh has proved a reliable barometer of a broader economic recovery. In 2006, prices at Tattersalls jumped 16 percent, prefiguring a 2007 bump in the U.K.’s gross domestic product. Conversely, when the financial crisis struck in 2008, bloodstock prices plummeted almost 20 percent.
If the December sales are any indication, the economy may again be hot to trot. The bloodstock business is like the futures market, says Teddy Grimthorpe, the racing manager for Prince Khalid bin Abdullah of Saudi Arabia, Frankel’s owner. Buyers are using a broodmare’s pedigree to predict whether she can produce a foal that will win as a 3-year-old.
“Dancing Rain is like a Picasso,” Lord Grimthorpe says. “You can try to value her, but it inevitably comes down to two bidders and how much they want her.”
In the end, Sheikh Mohammed wanted her enough to shell out about a third of the $21 million he earned in prize money worldwide in 2013 through his racing operation, Godolphin.
“She’s a phenomenal physical model, and she has a great pedigree,” Ferguson says. “It’s the start of a line.”
Fairy Tale Ending
Dancing Rain’s sale was a fairy tale ending for Martin Taylor, a 53-year-old partner at Freshfields Bruckhaus Deringer LLP, and his brother Lee, a 49-year-old former partner at Linklaters LLP. In 2009, they hired Liam Norris, a bloodstock adviser, and William Huntington, Queen Elizabeth II’s former racehorse trainer, to help them get into the business.
Their interest grew in part from their grandfather, who was a tic-tac man -- a white-gloved chap who stood at the side of the track and used hand signals to indicate the odds on horses before the race. Dancing Rain was only the second horse the Taylor brothers ever bought. They paid 200,000 euros ($272,000) in 2009 at Goffs, the auction house in Ireland. After her surprise victory at the Investec Oaks in June 2011, Dancing Rain went on to win two more top prizes, in Düsseldorf, Germany, and at Ascot Racecourse in England, bringing her career earnings to 572,505 pounds -- more than triple her original price tag.
‘Hit the Jackpot’
“They hit the jackpot very early,” says William Haggas, Dancing Rain’s trainer.
Yet prize money is tiny compared with the fortunes that can be made from breeding. At the end of 2012, Dancing Rain retired from racing at roughly the same time as Frankel, who, after taking home some 3 million pounds during his three-year career, had been put out to stud. In March, he covered, or copulated with, Dancing Rain, earning a cool 125,000 pounds for his mere minutes of service.
In his first year at stud, Frankel covered 133 mares, successfully impregnating 95 percent and raking in 13.6 million pounds -- more than four times his lifetime prize winnings.
Dancing Rain can’t hope to match Frankel’s income at stud. After all, mares can produce only about one foal a year. Even if Dancing Rain’s offspring by Frankel turns out to be a champion, we won’t know for another two to three years.
For the Taylors, that wasn’t a bet they were willing to make as they embarked on building their own stud farm.
“There was too much money in one animal,” Norris says. “She’s very expensive to insure.”
These days, Dancing Rain is being pampered in her thatched-roof stable at Darley Stud in Newmarket, the Ritz of stud farms. She rolls around in grassy fields surrounded by neatly trimmed hedges and Martha Stewart–worthy wooden fences. And she’s busy nursing her filly foal after giving birth in February.
Blissfully unaware of how she’s transformed the fortunes of her former owners, Dancing Rain remains a hopeful sign of a continuing recovery.
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