Quote:
Originally Posted by Kasept
I said I don't blame them for being frustrated with Frankfort and nearly a decade of inactivity. Try approaching this from a practical standpoint where you're in this business in KY watching as Iowa, Indiana, Pennsylvania and now even Ohio syphon off your horse population with their gaming-enhanced purses. What are you supposed to do? If you say, what does Keeneland do, note that Churchill doesn't have a horse sales business to underwrite their racing program. It's not a defense for raising takeout. It's an explanation of the environment in which the decision was made.
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Steve,
Thank you for the intelligent discourse and responses in this thread. Obviously, this discussion could descend into an ugly discussion and the community here at Derby Trail has kept the conversation on point.
Earlier in this thread in our first exchange, you mentioned that CDI has an obligation to its shareholders. You are absolutely correct and have succinctly stated CDI's number one problem as a corporate entity. Horse racing and gaming is their vehicle to render shareholder value, their mission. Having doubled their share price in the last three years, you could argue that CDI has been successful.
Our problem is that the sport itself is not their underlying mission. This is what creates the tension between horse enthusiasts and the actual product on offer by CDI. Your messages explain that they are raising takeout in order to potentially force the gaming discussion within the state. In the near-term, this helps neither racing nor the shareholders, but the longer term view is being taken with the shareholder in mind.
One could argue that CDI is holding excessive capacity : excessive real estate holdings and conducting an excessive number of races. These holdings are often gambles on favorable gaming legislation rather than offering a managed horse racing business model.
Is CDI managing their capacity and product effectively? Should they be forced to unlock the embedded value of these holdings either through facility/real estate sales or increasing demand (by decreasing supply). Running the September meeting created further dillution of their overall product and provides a platform to argue about overall supply.
Arguing that CDI is under the gun in Kentucky due to gaming in neighboring states provides an unnecessary free pass to the management team. Clearly, this has not impacted their share price escalation.
As a shareholder that was handed a take-out rate as the solution to business problems on the horizon, I would question why the company would not create a 25-30% across the board rake on all bets if that is indeed the correct business solution.
Ultimately, Keeneland understands its business - horse sales and boutique meetings - and the variables involved in those models. Rather than playing for gaming revenue, the Keeneland company gives the impression of a better managed horse racing entity within the rules that bound Kentucky.
This brings us back to my opening comment where I have decided not to wager on their centerpiece event this year. There are plenty of three year old events during the year, many likely better positioned in the summer months.
As we learned from Wall Street, Lehmans and Bear Stearns were allowed to fail - perhaps horse racing has reached the point where some major players must be allowed to fail as opposed to being propped up from the horse player.
Sincerely, Scott