The emergence of the concept of fractional ownership in the art world has bestowed a remarkable opportunity upon budding investors, allowing them to partake in a market that was previously known for its steep barriers to entry.
In a recent conversation with Ryan Johnston, the Chief Marketing Officer at aShareX, he shared some insights into the platform's unique approach to art investing. aShareX is an online platform that aims to democratize fine art ownership by allowing people to purchase shares in works of fine art. It offers both fractional ownership and full ownership, providing opportunities for a broader range of investors to access the traditionally exclusive asset class of fine art.
What is aShareX?
aShareX is a digital platform that facilitates auctions for fine art pieces, where participants can bid for either full or fractional ownership of the artworks. The company's mission is to make fine art investing accessible to as many people as possible. It allows individuals who make at least $50,000 per year or have $50,000 in investable assets to participate in its auctions. The platform is open not only for individuals but also businesses, trusts, pension funds, foundations and endowments.
How Does It Work?
The workings of aShareX are intriguingly different from traditional auction platforms. The key difference lies in the concept of fractional ownership. Fractional ownership is essentially partial ownership of an asset. In this case, aShareX facilitates the fractionalization of artworks, enabling buyers to purchase shares in a piece of art that they might otherwise not be able to afford. The number of shares one receives is proportional to the amount of their winning fractional bid as a percentage of the total artwork sale price.
What You Get As a Fractional Owner?
When you buy a fractional ownership interest in an artwork, you receive shares representing that interest. The number of shares you receive is proportional to the amount of your winning fractional bid as a percentage of the total artwork sale price. Additionally, when copyrights permit, you may also receive a high-resolution image of the artwork for personal use.
What happens if you buy the entire art piece?
On aShareX, the process of gaining full ownership of a piece of art is quite similar to traditional art auctions. Participants who wish to fully own an artwork can bid for outright ownership in the auctions. This option is open to bidders regardless of their citizenship, except for countries under embargo.
It's important to note that the platform is not only limited to fractional ownership but also accommodates full ownership of artworks. In the case of full ownership, the winning bidder takes outright physical ownership of the artwork after winning an auction. It's also worth noting that the Sourcing Fee (which covers storage, security, insurance, and administrative costs associated with maintaining the artwork) charged by aShareX does not apply to full bidders who take outright physical ownership of the artwork.
After winning an auction as a full bidder, the individual will be contacted directly by aShareX or their auction house partners to coordinate payment and shipping.
The Artwork: What Happens Post-Auction?
When an artwork is fractionalized, the fractional bidders who win the auction receive shares representing their proportional interests in a Delaware LLC. This Delaware LLC wholly owns a Cayman Corp, which in turn has the title to the artwork. The artwork is insured and is stored in a professionally secured art warehouse located in the United States or a museum.
Market-Based Pricing: Let the Market Decide
aShareX's approach to pricing is purely market-based. Unlike other fractionalization managers that acquire the artwork, mark up the price, and then sell shares at that price, aShareX lets the market, or bidders, ultimately determine the artwork’s value. This approach ensures a fair and competitive pricing mechanism.
Due Diligence: Making Informed Decisions
In partnership with auction house partners, aShareX conducts lending-grade due diligence on all artworks selected for auction. This due diligence typically includes an estimated value range for the artwork, a condition report, provenance, exhibition and publication histories, and a catalogue raisonné. This information is shared with prospective investors, enabling them to make informed purchase decisions.
Control in the Hands of the Investors
To allow investors to track the performance of their investments, the platform provides annual appraisals on all fractionalized artworks. Investors can then manage their portfolios as they see fit, informed by these appraisals.
The decision to sell a fractionalized artwork is also left in the hands of the shareholders. During the 6th and 7th years of ownership, shareholders vote by a simple majority, based on the number of shares owned, on whether to sell the artwork. If the shareholders vote to hold the artwork in the 6th and 7th years, aShareX will sell the artwork in the 8th year and distribute the net proceeds at that time.
Secondary Market and International Participation
aShareX also operates a secondary market where sellers can list their shares for sale at a price of their choosing, and prospective buyers can list their offers to buy at prices of their choosing. At present, the platform accepts fractional bidders who are citizens of the United States. However, full bidders seeking to purchase outright ownership of an artwork can participate regardless of their citizenship, barring countries under embargo.
In conclusion, aShareX is a platform that aims to democratize the world of fine art investing. By utilizing the concept of fractional ownership and providing a wealth of information to prospective investors, they have created an accessible and transparent method of investing in high-value art.
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