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Fine art investment for the ‘not so’ filthy rich




By Lisa Walls-Hester on 20th August 2016


Ever wanted to own a Jackson Pollock or vintage Porsche? Well, you can stop dreaming because a new platform, Shares.com, is planning to bring this assets class to retail investors.

 

Anyone will soon be able to own ‘a share’ of their favourite artwork or antique and Shares.com may even list the odd stately home or fine wine collection. The new platform is currently raising capital on Seedrs to ramp up its marketing efforts and expand its UK investor base before it lists its first assets.

 

Technology is bringing more choice for retail investors. While equity crowdfunding and peer-to-peer lending platforms have been around for a few years and give us the opportunity to buy a small share of a company, other assets classes are increasingly in our sights as new platforms push the financial innovation boundary even further.

 

Recently WiseAlpha gave us a marketplace for secure blue-chip corporate investment and we have and an endless list of property platforms with varied investment models. Now Shares.com will allow the crowd to invest in fine art and high-value collectables, a market previously only open to those people in the industry or the financial elite.

 

Shares.com says it will fill a gap in the trading platform market and aims to reshape the art investment sector with a model that allows anyone to purchase shares from as little as £100.

 

According to the TEFAF annual report, the global art market achieved total sales of $63.8bn in 2015 and the UK represents around 21 per cent of the total global market share.

 

The platform says sellers will be attracted to the marketplace because it offers a brand new route to market and a lower fee structure than traditional auction houses. It can do this due to lower overheads and because its cuts out intermediaries.

 

Ibrahim Sal, business development director and co-founder of Shares.com, said: “With the launch of Shares.com, we are combining the traditional method of investment and asset trading, with the new crowdfunding trend that has taken off around the globe.” 

 

“Our group investment model is giving investors without immediate access to huge funds the chance to start their own portfolio of micro shares on the asset classes we cover.  By clubbing together with other investors, shares.com members can be part-owners of high-value art or collectible items.”

 

Shares.com acts as a broker between a willing seller and registered investors. The seller decides which asset to list, when to sell, and suggests the sale price. Shares.com then validates the asset with an independent valuation. The sale is complete when the full asking price is achieved through the purchase of micro shares. 

 

Shares.com says all assets sold are stored in professional art storage facilities and are fully insured to provide extra protection for investors.

 

The Raise

 

The platform has the support of two angel investors and now wants to raise £200k for 10 per cent equity. Its pre-money valuation is £1.8m and the platform has so far raised over a quarter of its target.

 

The platform believes it has several strong unique selling propositions which determine its value proposition:

• An “early mover” advantage in this online investment class.

• A market disrupter, by opening up the markets for high-value assets, bringing sellers and buyers together directly and bypassing traditional dealers and brokers.

• The ability to structure largely indivisible assets into affordable shares within a new, regulated marketplace where they can be bought and sold with ease.

• An all-in-one platform that includes a primary and secondary market for the sale and purchase of shares in alternative assets, as well as a service that removes the need for investors to actively manage their underlying asset, for example, to maximise income, provide secure storage or arrange specialist insurance cover.

 

The platform will earn revenue from its sales commissions, an investor’s initial investment and a success fee for profits on disposal. Admin fees will also be charged for trades done on the platform.

 

  • Art and collectibles attract a 20 per cent commission on the sale price, one per cent buyers’ premium to be charged to investors and 10 per cent on any profit when the asset is sold.
  • Real estate attracts three per cent commission on the sale price; one per cent buyers’ premium; Ten per cent on any rental income and three per cent on any profits upon exit.

Shares.com does not currently operate an active secondary market but like all platforms are promising to roll one out at some point in the future. Until a secondary market is established asset resales can only be made on a matched bargain basis.

 

The site currently showcases three assets ready to be sold and says it is in the process of due diligence on several more.

I applaud new models which give retail investors more investment opportunity, and I look forward to seeing the assets launch on Shares.com. However, the success of this site is dependent on how many investors tune into this new model and how quickly the platform can build a secondary market. Because investors who dip their toes into untested waters may end up holding investments much longer than they anticipated, after all, where else are you going to find a buyer for a one per cent share of a Picasso?

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