VARA licensed tokenization marketplace Tokinvest announced a deal to tokenize financial interests in thoroughbred race horses. It was appointed as the tokenization partner by Evolution Stables, a New Zealand startup that is structuring syndicated leases based on New Zealand horses. Tokenivest was keen to emphasize these are not NFTs, they involve real world asset (RWA) tokenization of financial securities.
Often investment in horse races is as much about fans engaging with a sport that they love as it is about the possibility of making money.
Tokenization disrupting the ownership model
Typically a syndicate of people will get together and buy a young horse that’s trained at a well known racing stables. Hence, they have to fork out additional expenses before the horse participates in races. Evolution Stables is disrupting that approach. Instead, it will take horses with some racing track record at the start of their careers and offer one year leases, with the token holder getting part of the earnings for that year for a fixed price.
Evolution Stables’ partners include Woburn Farm and trainer Stephen Gray.
“Ownership models in this industry haven’t changed or advanced in years. They still work well for existing participants, but with an aging ownership base and the next generation of investors looking for digital-first solutions, the time for change is now,” said Adrian Stanley, Owner of Woburn Farm.
“The interest is there—people want to invest—and with New Zealand being the perfect breeding ground for world-class bloodstock, the opportunity is clear. But barriers like limited access, liquidity, and knowledge have always held back growth.”
Which is where tokenization comes in. It will enable greater certainty of income to the owners and potentially provide the ability for the leaseholders to exit early if they wish to, although there’s no guarantee.
“Giving people a chance to come along for the ride through this kind of model is a fantastic way to grow the sport and bring fresh energy into the game,” said trainer Stephen Gray.
For fun or for the return?
While the Tokinvest announcement considered the investor’s perspective, we like to look at all angles. Who is selling and why? It provides a partial fixed income to the race horse owner(s) depending on the proportion of the income that’s subject to the lease. Otherwise, relying on race winnings can be a lottery. They are the ones who can best judge the capability of the horse.
We know little about horse racing, but from a financial perspective, the higher the proportion of the earnings that are sold as a lease, the less confidence the owners have that the horse can exceed those winnings. If they have very little skin in the game for that year, that’s an indicator of poor expectations for the winnings.
Syndicate owners are often rather knowledgeable about horse racing. Without an independent third party on the ground who knows their stuff and can inspect the horse for signs of a minor injury that could blow up, there are considerable risks for offshore investors.
But having a third party costs money and who would employ them apart from Evolution Stables, which is not independent? Additionally, Evolution Stables is an intermediary, and they need to be compensated as well. All of this eats into the likely potential return on the investment. Other risks are outlined on this website. But this doesn’t detract from the potential entertainment value of having a stake in an active race horse.
Additionally, there is competition with fractional ownership sites such as US-based Myracehorse.com, which has a poor Trustpilot rating of late. Reviewers on Reddit appeared to enjoy the experience and consider it more of a community and fan club. Many said that investors should not expect to make their money back.
About Tokinvest
Scott Thiel is CEO & Co-Founder of Tokinvest. The lawyer previously led DLA Piper’s TOKO tokenization platform, including after the law firm spun out the venture. TOKO has since been renamed to Scintilla. As part of his role at DLA Piper he was on the Hedera Governing Council, and remains a director of Hedera.
Tokinvest recently raised a $500,000 seed round and developed relationships with other international exchanges, including Singapore’s InvestaX and the UK’s Archax. It expects tokenized real estate to be an important asset class for its exchange.
