What Happened to IEAH?

Founded in 2003, IEAH has modified its business model several times. Once a significant player in the 2 year old in training auction scene as a buyer, they quickly shifted tactics to privately buying horses after they impressively broke their maiden. Big Brown was purchased in this way as a juvenile after he impressively won by around 11 lengths at Saratoga. In fact, IEAH won out over Darley’s bid for Big Brown, as Darley wanted 100% ownership, where IEAH only purchased a majority stake from Paul Pompa, the original owner.

Surrounded by controversy, IEAH continued to be a major player in the New York Circuit. But whether it was Rick Dutrow’s (who trained nearly every single IEAH horse) contentious comments about using steroids to train Big Brown, or a myriad of law suits emanating from an attempted take over, there never seemed to be an end to all of the turmoil.

After combing through the ownership and partnership data on Equibase and searching sales results starting in 2003 and ending in 2005 (when Iavarone seems to have ceased purchasing 2yos in training and started privately buying horses on and off the track) there are several things that become obvious. But first, a brief history of the company.

IEAH was founded in 2003. From the company’s website:

International Equine Acquisitions Holdings, Inc., is a unique company founded in 2003 that services many facets of the Thoroughbred racing game. In its short history, International Equine Acquisitions Holdings, Inc., through its wholly owned subsidiary IEAH Stables, Inc., has enjoyed enormous success on the racetrack campaigning several graded stakes winners. The ultimate goal of IEAH Stables, Inc. is to become a breeding entity that parlays its accomplishments on the racetrack into a racing operation that grows from within.

Additionally,

IEAH Stables, Inc. was formed as a subsidiary of International Equine Acquisitions Holdings, Inc., to race and breed Thoroughbred racehorses. The success achieved within IEAH Stables, Inc., has created a desirable platform for investors to participate in ownership. Plans are currently in place to raise $100 million to create and manage an Equity Horse Fund, which will operate as a hedge fund and will be managed by IEAH Stables.

And they certainly have campaigned some fantastic horses. From 2007-2009, they had four $2 million-plus earners. That’s incredible.

But starting in 2008, there was a major shift of both focus and resources from IEAH Stables, the racing entity, to IEAH Holdings, the industry-centric entity.

In a major, and capital intensive, venture, IEAH funded the construction of the Ruffian Equine Medical Center located in Elmont, New York. Intended to provide services to both the NYRA race horses and to the sport horses of Long Island, the center was immediately adjacent to Belmont Park.

In theory, this sounded great. An accessible facility, extremely close to a pair of tracks that in concert operated year round in Belmont and Aqueduct, and in an area of New York where no other facility existed that was even remotely comparable made it sound like a slam dunk to be a success. But the Center, which opened its doors in 2009, never saw the kind of business that it probably should have.

But the Paulick Report stated in March of 2011,

IEAH has been the subject of at least one lawsuit over unpaid invoices, and if trainers or veterinarians were owed money or struggled to get paid by IEAH's racing stable, they were reluctant to support the the same corporation's hospital by sending horses there.

That seems like IEAH alienated a lot of horsemen. But it seems to give a lot of weight to the amount of business IEAH had…

In addition the hospital was completed during a severe recession, which hit horse owners of all disciplines.

Ah, there we go, the Paulick Report. That’s why the Medical Center failed. So IEAH, in 2009, sunk $18 million into an equine hospital that was closed two years later. In fact, planning for the facility began in 2004, only a year after IEAH was founded and prior to any major successes they experienced on the track. Topping that, the initial estimate was $7 million, and then upon expansion of the plans it rose to $15 million. The building of the facility, which broke ground in the summer of 2007, was financed in large part by IEAH Holdings. When you look at the timing of the investment and also look at the partnership’s racing starts and income, you can see that the investment coincides with a drastic reduction in starts and earning by the stable.

So whether IEAH ran out of money, made a business decision to shift drastically away from racing and towards the medical and breeding side of the operation, or just hit plain bad luck, you can certainly see the correlation between the investments turning away from runners and towards the other side of the industry.

Additionally, when you look through IEAH’s published roster of horses on their website (which is spottily updated, but includes ’12 foals, so it’s probably good enough for my purposes), there is a trend that begins in 2008 where IEAH begins to breed their successful race mares. They even went so far as to purchase a broodmare prospect in 2008, Tantrum. Currently, there are 36 listed foals, some as early as ’09, that are listed under their foal designation (sire-dam-year) and not under an individual name. A sizable number are by Big Brown, which makes sense considering their sizable share in the stallion at that time.

All told, it appears IEAH shifted resources from IEAH Stables to IEAH Holdings, et al, and began a concerted effort at being a major industry player off the track. Their pinhooking operations, which began serious work in about 2008, was sold to the American Basketball Association (note: I remember reading this headline last year and just shaking my head at how weird it seemed; the personal relationship between Iavarone and the ABA owner is where I placed my reasoning for the deal). The pinhooking shop did a relatively good job, purchasing Union Rags from Mrs. Wyeth and then reselling him back to her for a profit amongst several others.

This week, IEAH sold off their remaining interests of Big Brown. From what I can find/see, that is one of the last assets they owned directly tied to breeding. Rumors are that IEAH is accumulating a large capital investment right now in order to make a splash in the racing scene again here in the near future.

Honestly, I was excited when IEAH came on the scene as a major player. I felt they had the ability to be a New York City-centric partnership that could rival West Point, Midwest, and Team Valor as conglomerates that had proven ability to find, develop, and campaign solid, high end runners and get people into the game. I think I probably misunderstood the goals of the company at that time since now it seems that IEAH always had its sights set on being a dominant national level player not just on the track, but at every level of the thoroughbred industry from stallions, to broodmares, to sales, to pinhooking, to medical care, to racing, to you-name-it. It didn’t matter what it was, Iavarone and IEAH wanted to get there and stay there as industry stalwarts.

At some point, be it the recession, bad luck, bad business, whatever, IEAH just didn’t make it. But to start the company and five years later be nominated for an Eclipse Award as an owner and winning one for best 3 year old male, well, that’s an amazing achievement. Hopefully, the company gets its feet back under it and is able to reemerge as an influential owner of quality runners. No matter what your opinion of IEAH, it is important to have interested owners, and especially ones that showed the ability to campaign some serious horses.