As part of my studies with the Equine Business program at the University of Louisville, we'll be driving down to Lexington later this week to watch the auction in action. For those who might not have a firm grasp on how these sales work, here are a few things to keep in mind.
The auction lasts two weeks, and about 5,000 one-year-old thoroughbreds will be put up for sale. The first few days, you'll see the highest-priced horses - the Sheik of Dubai bidding against an Irish billionaire for a top Giant's Causeway foal - that kind of thing. As the days wear on, the prices fall off in general, but any given day, you can see horses selling for hundreds of thousands of dollars.
Horses are kept in one of 49 barns at Keeneland, and they will spend 2-3 days on site. Potential buyers will, in general, only get 3-5 minutes to look at a horse on which they might fork out thousands of dollars. They're trying to ascertain the horse's physical and mental characteristics, in addition to the pedigree research they've presumably already done. Buyers also hire veterinarians to examine the X-rays of thoroughbreds in the "repository," where about 35 digital images of each horse's bone structure are available. Popular yearlings will be viewed more than 100 times.
The sale takes place in Keeneland's auction ring. Did I mention how ridiculously gorgeous Keeneland is? Anyway, in a given day, about 300 horses pass through the ring, where an auctioneer sing-songs the live bids being placed from the audience. Bid "spotters" are in charge of figuring out who is actually bidding. It's not like your typical auction where people just shout out their bids, or raise a placard. Some people don't want their bids known, so the bid spotter has the difficult task of reading people's body language to determine whether or not they're making a bid. A nod here. A twitch of the nose there. Seriously, that's how it works.
The seller (known as the consignor) has the option to put in a "reserve" bid before the sale starts. This is the price at which the seller will buy back the horse. Sellers do this for two reasons. One is to possibly drive the bidding toward that price. The other is to set a minimum level below which they will not sell the horse. It's tricky. If you buy back too many of your horses, people will think they aren't worth as much. If you don't buy back any of them, they'll think you don't have any confidence in your horses. Owners who push the price of their horses too high and scare away bidders are said to have been "caught speeding."
Another fun piece of terminology is the "pinhooker." These are people looking to flip horses like houses. The term comes from Kentucky's tobacco heritage. A pinhooker is a device used to pull tobacco out for a look-see. Pinhookers are simply hoping to buy a horse for one price and sell it later for a better one. This is also a tricky business. If you buy a yearling in September, you'll probably have to hold on to them until the two-year-old sale in the Spring, incurring the expenses of taking care of the horse and hoping to god they don't come down with some problem.
Finding the right horse takes a good eye, in many cases a lot of money and almost always a bit of luck. Yearling sale prices have dropped considerably the past couple of years, but that's probably a good thing overall. As Jim Squires described it in his book "Headless Horsemen," these auction sales had become as ridiculous and sleazy as subprime mortgages. I'm of the opinion people should keep their heads on as much as possible.
I will post photos and stories from the "ring" after I go to Keeneland.
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