Purchasing fine art has historically been the realm of the extremely rich, but this could soon change.
Presented as the first investment platform for fine art, Masterworks uses Ethereum blockchain technology to bring the art world to the masses. The venture plans to establish a stock exchange for high-valued artwork, made secure by a digital contract that parties cannot revoke.
The process starts when Masterworks buy a painting “below fair market value” that has a high appreciation potential. After filing their purchase with the U.S. Securities and Exchange Commission (SEC), the startup then sells shares of the painting to investors.
Soon investors might be able to trade these shares within a market, although the Masterworks’ website states, “we do not expect any such trading or brokerage relationships will be available within the next twelve-months”.
Scott Lynn, a former tech entrepreneur, founded the company in 2017 after numerous successful investments in artwork. Lynn explained “in 2012, I acquired a 1975–76 painting by Willem de Kooning for $7.4M. Two years later, I sold the same painting for $13.5M in gross proceeds”.
The creation of Masterworks also follows a recent financial shift, in which the sale of luxury assets has surpassed stocks and bonds. According to the Wall Street Journal, S&P declined 5.1% last year while the art market returned 10.6%.
“People are looking for a place for their cash, and the security of holding something physical is appealing” commented Anthony Maxwell, director of the London-based wine exchange Liv-ex.
The investment startup already boasts a small yet impressive collection of artworks, including Claude Monet’s Coup de Vent and Andy Warhol’s 1 Colored Marilyn. These paintings were bought for $6.3 and $1.82 million (£4.7 and £1.4 million) respectively. Warhol’s oil and silkscreen painting is the first artwork to be offered on the website, with 99,825 shares available to buy at US$20 (£15) each.
The introduction of platforms like Masterworks provides a welcome alternative to selling whole artworks to single investors. Art dealing could become less exclusive as a result, and art itself more relevant to a much wider audience.
Lynn elaborated, “if an artist takes a painting public through the Masterworks platform and gets 10,000 investors, those investors are more likely to follow that artist in the future and engage with her work”.
While the idea seems feasible, and even admirable, potential clients may be reluctant to invest in artwork they cannot personally admire. Masterworks has so far announced no plans to set up a viewing space for its investors.