Art News Masterworks – Crowds gathered at Christie’s Rockefeller Center headquarters last month to bid on the collection of late tech billionaire Paul G. I decided to collect. Some of the big names in the art world were relative newcomers. At a five-year-old art finance startup called Masterworks, two executives were arguing over an abstract painting by Gerhard Richter.
Founded in 2017 by serial tech entrepreneur Scott Lin, Masterworks has spent the past few years accumulating artwork that underpins its unique business model. In other words, it sells fractional shares of securitized artwork by blue-chip artists to general investors, effectively treating the artwork as a publicly traded company.
Art News Masterworks
In 2021, Masterworks raised $110 million in Series A funding, including funding from Tru Arrow Partners, led by Left Lane Capital and co-founded by MoMA board member Glenn Fuhrman. The support helped push the company’s value past $1 billion. The company bought more than 100 paintings worth $450 million by February 2022 (that amount had risen to $475 million by May, according to internal documents).
Art Investment Platform Masterworks Is Now Valued At $1 Billion
But behind the scenes, things have been tumultuous, according to interviews with more than 20 current and former employees, nearly all of whom asked to remain anonymous for fear of legal retribution. The company has navigated conflicting business strategies, rifts between management and key teams and non-existent HR practices throughout 2022 and several times before, according to people familiar with the matter.
At the root of these conflicts are employee incentive structures and sales strategies that some former employees have deemed ethically questionable, with experts calling them and the company an SEC trustee. She said it may have exposed her to violations of SEC and FINRA rules. Rules.
Masterworks Raises $110m To Sell Fractional Shares Of Physical Art — Not Nfts
Welcome to the first publication of Digital Wealth 2023. We’re kicking off the new year with something different, taking a closer look at Masterworks, an art investment platform.
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⭐🇺🇸 New masterpiece from startup plagued by internal strife, accusations of recklessness and job cuts – ARTnews, December 27, New York
London, Uk. 25 April, 2022 . Claude Monet, Le Grand Canal Et Santa Maria Della Salute, 1908. Estimated In The Region Of $50 Million. Preview Of Masterworks By Monet & Picasso At
Masterworks Since 2017, Masterworks has built a reputation for introducing the world to high-quality securitized art investments. Over the past five years, the startup has collected a number of world-famous works of art, including Picasso, Warhol and Monet. Known as a part-art investment platform, it allows retail users to acquire pieces of famous paintings to touch high-end assets. And we’re not talking about NFTs. However, recent reports have revealed a more difficult business model in the current financial market – they struggle to sell more images to potential investors, increase the market value of the images and leave one behind in marketing. Spending a million dollars a day and potentially running into various FINRA and SEC regulations, bringing up the idea of ”de-affiliating” art to museums, etc. In 2021, Masterworks raised a whopping $110 million in a Series A funding round led by Left Lane Capital, bringing the startup’s valuation to over $1 billion. By May 2022, the company had purchased over 100 images for $475 million, making them available to over 400,000 registered users. 5% of those users are reportedly actually invested, a former employee says, which isn’t an unfair conversion from free to paid, but not enough for a large wealth management business. . To acquire works of art, the Masterworks Acquisition team works with auction houses and private dealers to select “investment quality” pieces. The company’s licensed brokers then sell fractional shares of blue-chip artists’ securitized artworks to individual investors. The painting included a cast of Basquiat in all colors (Part II) valued at $22.5 million, which Masterworks sold for $20 per share (minimum investment of $5,000). When a work is purchased, Masterworks must sell all partial shares of the painting before the money leaves the company’s escrow account with the seller of the artwork. But behind the scenes, the company was plagued by conflicting business strategies and management rifts, leading to forced attempts to increase sales on price. It combines intermediate and initial survival risk. Picasso’s ‘Etrante’ received 42.7 times the public rating. The Art News article covers Masterworks’ recent challenges well. Here’s what we noticed: (1) specifically targeting wealthy men over 35, rather than the general public as advertised, and encouraging employees to use investor bank account information via Plaid during conference calls with potential investors; I encourage you to (2) Use heat maps to determine which employees sold the most shares to stimulate internal competition for quota — FINRA and the SEC are representatives when selling securities to clients. We have strict guidelines for sales contests to prevent anyone from engaging in unethical or deceptive behavior. , SEC rulings, and FINRA rulings in 2010 and 2111. (3) By waiving the minimum investment to close a deal at $100 instead of $5,000, it could give a false impression of the type of financial product being offered. The boilerplate sales culture has always been a problem for the financial asset distribution business. Remember the 2016 Wells Fargo investigation? Wells Fargo was fined $3 billion after an investigation revealed a culture of pressuring workers to create fake accounts to meet quotas. (4) Prioritizing the needs of the company over the needs of investors by encouraging sellers to sell inventory of paintings for which there was little interest. After all, this is not a fiduciary RIA advisor trying to manage a client’s portfolio. Masterworks’ Banksy Chart Despite the internal strife at Masterworks, we see a lot of promise in the fractional art investment industry. Bank of America research shows that demand for portfolio diversification from traditional stocks and bonds into alternative assets is attractive to younger investors with at least $3 million in investable assets. I’ve been. Last September, we analyzed Artory/Winston, a joint venture between Artory and Winston Art Group, which created a $25 million tokenized art fund. The product is available on Securitize, a digital asset platform that uses blockchain technology for private companies to tokenize assets and raise capital. With a management fee of 1.25%, the fund includes 68 titles, of which 3 are excellent titles (average value of $2 million), 15 mid-range titles (average value of $600,000) and 50 titles. It is a work in progress (average value of $200,000). Masterworks introduced this index fund approach to “close” the commercial works that brokers struggle to sell, targeting accredited institutional investors and starting with a minimum investment of $100,000. UBS & Art Basel Art Market Report 2021 The concept of investing in art for purely economic purposes is not new. Early generation art investment funds (eg the 1974 British Rail Pension Fund) have long attracted interest among investors seeking higher returns and diversification. Today’s fractional ownership model is an extension of the same desire to provide access to investments in alternative asset classes that have long been limited to ultra-high net worth. Securitization and fragmentation of the asset class will make art more accessible to retailers. In the short term it creates volatility, but in the long term it creates opportunity. Deloitte Art & Finance Report 2021 Given today’s macro environment, it is worth noting that the arts have historically recovered and developed faster than traditional asset classes in volatile markets. In 2021, total art and antiques sales by dealers and auction houses will reach an estimated $65 billion, up 29% from 2020 and surpassing pre-pandemic levels in 2019. The market will become even more exciting when we realize just how big it is the challenge was blockchain-based art. The latter is important given that 83% of wealth managers said a lack of transparency was a key factor undermining confidence in the art market. An opportunity to tokenize global illiquid assets by 2030. But will this time be different? Even within the asset class, investor concerns are growing. The S&P 500 is down 20% year-to-date in 2022, its worst year since 2008. Partial arts investment platforms will have a tough year ahead as investors flock to the safety of their money. The art market and, incidentally, all risk assets, are expected to continue to lose in 2023, especially for artists who are less than expected, and investments in emerging artists may become illiquid for an extended period of time.
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