The company founded in 2017 offers to invest shares in works by Banksy, Andy Warhol or even Picasso, as one buys shares on the stock market. The minimum investment is 20 euros. But it is not without risk.
Masterworks’ main argument is that the art market has seen higher returns on investment than Wall Street for 25 years. The amount of private collections in the world is estimated at 1,700 billion dollars. Except that it is an exclusive market reserved for experts and millionaires. Scott Lynn, the startup’s creator in 2017, had an idea when he saw his own collection go up in value. This entrepreneur thought that everyone should have access to the market.
Paintings that you don’t hang in your living room
Since then, Masterworks has accumulated around 100 paintings and has become what is known as a “unicorn”, i.e. a start-up whose value exceeds a billion dollars. At least 15,000 people have purchased pieces of artwork through the company’s site. Masterworks experts rely on the famous data, analysis data, identify paintings with great potential, sometimes big names like Banksy, Andy Warhol, Picasso, Monet… The firm buys them and declares them to SEC, the American stock market policeman. The work becomes a kind of listed company and investors can therefore buy shares, own a share of the work from 20 dollars.
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— Masterworks (@MasterworksIO) January 17, 2023
That doesn’t mean they can hang it in their living room for a few days, only that they own some of its value. And when the work is resold, like an action, they recover part of the profits. If they don’t want to wait for the resale, they also have the opportunity to sell their share on a secondary market organized by Masterworks.
Suspicions of unhealthy competition between employees
Art or not, it remains an investment, the risk exists. Masterworks warns that it takes patience and plans to keep the works between three and ten years. Only people over 70 can invest. Also of note, Masterworks retains 20% of the profits and charges a commission of 1.5% per year for the management of the work, a little more than the average of comparable investments. When the start-up sold the paint mona-lisa from Banksy for $1.5 million in 2020, investors recouped a return on investment of around 30%.
However, an ArtNEWS survey points to sometimes questionable practices within the company in a sector that is less regulated than others in the stock market. The American art magazine reveals in particular how Masterworks maintains an unhealthy competition between employees so that they push investors to buy, not always in the best interest of the latter.