A new type of investment
In the past 5 years, a new sector of the investment world has formed around the concept of fractionalizing the ownership of high value assets. The concept is simple enough: a company owns the asset, and fractional owners become shareholders in the company.
In the alternative investment space, the asset can be anything from any collectibles (e.g., a painting, colored diamond, baseball card) real estate, or a myriad of other types of asset.
The key is that the asset is likely to increase in value over time and can potentially act as a hedge against the risk of more traditional investment types such as equities or bonds.
Auction houses represent the logical way for fractional bidders to find assets
Let’s examine collectibles from an acquisition perspective, there are 3 main sources: Private Sale, Auctions, and Galleries.
- Private sales, by their nature, are both difficult to assess in value terms, and unlikely to be fractionalized.
- Gallery markups are often high, and gallerists tend to focus on 100% purchases from high net worth individuals.
- That leaves auctions as the most likely source of high value assets to fractionalize.
Not all consignments that come through an auction are appropriate to fractionalize. When aShareX looks at a potential consignment to sell, we consider a number of factors:
- Is the expected price high enough to make the cost of regulatory compliance worthwhile?
- Is the asset reasonably likely to increase in value over time?
- Does the asset have a clearly defined following from a “fan” base and/or investment perspective?
- Can the asset be insured, stored, and maintained over the ownership period?
Who are the fractional bidders for a consignment
When these criteria are met, aShareX works with the auction house to co-market the consignment, to encourage both full and fractional bidders. Our co-marketing programs focus primarily on bringing 3 groups of fractional bidders:
- aShareX’s own customer base
- Targeted audiences based on the asset
- That part of the auction house customer base who would not be able to bid on the whole asset
With the auction house primarily focused on the acquisition of full bidders there is, in effect, a doubling up of marketing focus, potentially significantly increasing excitement about the auction.
In-auction partnership with aShareX
Once in the auction, aShareX manages the fractional bidding to integrate with the auction house’s own live processes, having already carried out KYC/AML (“Know Your Customer” / “Anti-Money Laundering”) and financial checks.
When fractional bidders win, aShareX also manages payment processes to ensure timely collection and distribution of funds to the auction house then onwards to the consigner.
Auction House benefits
Benefits to the auction house are many and varied, but essentially come down to more pre-sale exposure, more bids, more engagement with existing and new customers, and fewer high-value passed lots.
Please contact kevin@asharex.com for a demo of our fractional bidding system.
