Robinhoods of the art world lure scores of investors in coronavirus pandemic
A New York start-up that allows investors to buy a tiny stake in paintings by world-class artists for just $20 has seen a surge in demand during the pandemic, according to its founder, and has bought 15 artworks since the onset of Covid-19 to feed their appetite. A recent $1.52 million initial public offering of a piece by the American graffiti artist KAWS sold out in a few hours.
“People feel that equity markets are overvalued and they are looking for other places to put money,” said Scott Lynn, a collector who started the company, Masterworks, in 2017.
Masterworks is at the forefront of a burgeoning niche in fractional ownership in luxury assets such as fine art, collectibles, vintage cars and even race horses such as Authentic, the winner of the Kentucky Derby Saturday. The startups offer the shares as an affordable way to invest in expensive, rarefied fields that are typically available only to the mega-rich. Think of it as the art market’s version of the popular trading platform Robinhood Markets, which lets users buy a fraction of a company’s share for a few dollars. It mirrors the democratisation movement unfolding in the stock market — except that the assets are inherently more risky and lacking of a track record. Auctions are filled with casualties, and even works by star artists can implode once prices get overheated.
The concept of fractional ownership isn’t new in the art market — or for thoroughbreds. It’s a buyer-beware investment: Robinhood itself is under pressure after complaints from novice investors and is facing a US regulatory probe. But the pandemic has heightened the taste for those risky bets. It’s
about the experience and the excitement of owning a part of something unique — even as many will likely take a loss. “Folks are stuck in the house, bored, and, if they’re lucky enough to be working, aren’t spending money on things they normally would,” said David Ritter, an analyst with Bloomberg
Intelligence. “So, they have money to play with.”
James Scollick, 40, an avid user of Robinhood from Los Angeles, discovered Masterworks on Instagram in July and invested $10,000 two weeks later. Half of that went into buying shares of a Condo painting and the rest into secondary-market shares for Banksy’s “Mona Lisa.” “It felt like a natural way to invest some of my money,” he said.
Masterworks has been luring about 10,000 new users a month during the pandemic, founder Lynn said, and it isn’t alone. Acquicent, a company founded last year to develop a trading platform for fractional-share owners of classic cars, saw an 80 per cent jump in the number of potential investors in the past three months, according to Anthony Citrano, founder and chief executive officer.
“It’s an asset class that 99.9 per cent of people could not touch ordinarily,” he said. “As far as people interested in investing, it’s very hot right now.”
At Myracehorse, the number of investors has tripled since April, according to founder Michael Behrens. More than 12,000 investors watched a race at Santa Anita Park in California on Zoom recently, some wearing #myracehorsewins T-shirts and hats. In June, the twoyear-old company bought a 12.5 per cent stake in Authentic, a colt trained by twice-triple Crown winner Bob Baffert, in a deal that valued the racehorse at $15 million. Otis, a one-year-old firm offering emerging art and collectibles such as sneakers and comic books, is also seeing an increase in demand. Of the 35 pieces it owns, 20 were purchased since March, according to founder Michael Karnjanaprakorn. Shares go for as low as $10. The most expensive offering was a $425,000 painting by Banksy.