It makes a lot of sense that he might go to stud in New Zealand; unlike Australia and the United States, they do not limit the number of mares (i.e. Sweet Lou has serviced as many as 250+ in a year). So, the economics might be something like this (assuming they don't race him any more): for the first three years, until it is really known if he is a top producer, he can do 250 mares/year at e.g. $7,000, which is $1.75mm/year for the 3 years which will "net" return their purchase money. If he is successful they might raise the free and have many years of a high ROI; if he flops, they have recouped their money.
Only in the horse game people just do back of the envelope math and make everything sound like sunshine and rainbows while, in fact, it's anything but. You conveniently forgot expenses which started the moment the hammered drop and believe me, don't end. And the plane ride home is 30US, the insurance to get him off the premises is 3% alone and it goes better from there. I agree with your assessment of the mares and what the stud fee may look like but getting their money back in three years is never going to happen.
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