Liquidity is the single biggest challenge facing those who invest in collectibles. While the numbers may be different, this is just as true for fine art and classic cars as it is for sneakers and baseball cards. If you've been lucky and one of your investments has seen a phenomenal return, you're faced with a binary choice: sell it and lock in your gain - forgoing any future growth, or keep it - leaving your gain at risk.
Liquidity is Flexibility
Consider the options one has with commodities or publicly-traded stocks. With those, if you've seen a massive return you can quickly and easily liquidate a portion of the investment. You can use the liquidity to reallocate your portfolio - whether to adjust for your risk tolerance or to take advantage of new opportunities. You can even use it for crazy things like paying the bills. 😉
O, The Pain of Illiquid Assets
Let's consider the scenario with illiquid assets like physical collectibles or other alternative investments. Let's say you put $25,000 into a classic car or piece of fine art, and it's now worth $100,000. While that's a fabulous return, you feel strongly that it still has a lot of room to grow. An opportunity to invest in another $25,000 piece comes along, but you don't want to put new cash at risk. What are your options?
Some private banks might lend you money with the asset as collateral, but it'll be cumbersome and expensive and they won't be excited about it. Some alternative lenders exist, but most have minimum engagements of $2-5M.
We're building a solution that will enable you to offer a minority stake in an asset and retain custody, control, and majority ownership. Imagine if, in the above scenario, you could sell 30% of the asset to enthusiasts like yourself. You remain 70% owner, pull out $30,000 in cash, and you have investors along for the proverbial ride! It's like a mini-IPO for collectibles.
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[Photo: Didier Weemaels via Unsplash.]