Own rare art or cars from $34

Rally Rd’s (above from left) chief financial officer Max Niederste-Ostholt, chief executive Chris Bruno and chief product officer Rob Petrozzo. The New York company sells artwork, luxury items and cars - such as a 1994 Lamborghini Diablo SE30 Jota
Rally Rd’s (above from left) chief financial officer Max Niederste-Ostholt, chief executive Chris Bruno and chief product officer Rob Petrozzo. The New York company sells artwork, luxury items and cars - such as a 1994 Lamborghini Diablo SE30 Jota - as securitised investments. PHOTO: NYTIMES
PHOTO: NYTIMES

Several technology companies are packaging rare cars, paintings and books as offerings in which any collector can buy shares

NEW YORK • High-price luxury items such as sports cars, fine art and even rare first-edition books are generally beyond the reach of average collectors.

Now, several technology companies are packaging rare cars, paintings and books as offerings in which any collector can buy shares.

Some offerings start with prices as low as US$25 (S$34) or US$50 a share.

In return, these retail investors can, the pitch goes, participate in the appreciation of a famous painting in the same way billionaire art collectors do.

"It's the idea that wealth is not accumulated off a salary," said Mr Rob Petrozzo, chief product officer of Rally Rd, which began by securitising cars and has recently expanded to art, watches, collectibles and even a first-edition Harry Potter And The Philosopher's Stone.

The prospect of buying shares in collectible luxury items, known as passion assets, is certainly appealing.

But when the underlying asset is fairly illiquid and not divisible, investors should still proceed with caution.

The investor is paid back only if the underlying asset or its shares are sold.

"Investors can't force the sale," Mr Steven L. Schwarcz, a professor at Duke University's School of Law, said. "That means a lot of the consumers investing in this will have illiquid investments when the marketing is saying you can make this stuff liquid.

"It's misleading to begin with."

Still, there is an opportunity for a return. The sponsors of these deals seek to eventually sell the assets to private collectors.

Rally Rd sold a Ferrari F430, which was on the platform for six months, to a private collector, earning a 17 per cent profit.

Mr Leland Sutton, a brand strategist and entrepreneur, is No. 6 on a waiting list to buy shares in the first piece of art offered by Otis, an online platform that plans to offer one or two cultural investments a month.

The first offering is a painting by Kehinde Wiley, who painted former United States president Barack Obama's presidential portrait.

Otis paid US$237,500 for the painting and has marked it up to US$250,000 for the initial offering of 10,000 shares.

"It's more tangible and feasible than putting your money into a Damien Hirst dot painting going for millions of dollars," Mr Sutton said. "People understand the cultural value of this and that they don't need millions of dollars."

He added that he was open to investing in the private asset class after watching his stock portfolio swing from positive to negative, and seeing the value of cryptocurrencies like bitcoin plummet.

Otis is offering a broad range of assets that it will securitise on its platform.

"The offerings span comic books, other artworks, luxury items like Rolex watches and Birkin bags," said Mr Michael Karnjanaprakorn, founder of Otis. "We believe in a diversified portfolio."

The bet on appreciation has some artists and other cultural creators interested.

The street artist who goes by Fnnch said he is creating his largest piece of art for the Otis platform.

Fnnch said he intended to retain an interest in his work, which could help him financially. He noted that a recent auction of Jeff Koons' Rabbit for US$91 million helped the market for the artist, even though none of that money went to Koons.

"It would be different if every artist retained 10 or 50 per cent of his work and benefited from the sale of it," he said.

"A platform like this opens up potential."

NYTIMES

A version of this article appeared in the print edition of The Straits Times on July 31, 2019, with the headline 'Own rare art or cars from $34'. Print Edition | Subscribe