The idea of fractional ownership has expanded to art and has gotten more popular during the pandemic mostly because other forms of auctions have been cancelled. According to Scott Lynn, the founder of Masterworks, they sold 15 artworks worth at least $1 million in the last 6 months only, including those of Brian Donnely, Andy Warhol, and Bansky. They have a combined experience of 75 years as collectors and dealers, and also collaborated with auction houses.

When Masterworks purchases a piece of art, they acquire an offering circular for it with the Securities and Exchange Commission. You will then have certain rights on it, which will be kept confidential, under the laws of the U.S. Their fees will include 1.5% of the annual management fee, that’s paid as equity, and the 20% of the painting’s profit. Additional expenses will depend on the fees of acquiring, sourcing, securitizing, and selling the artwork. You will be expected to read each offering circular carefully to understand the assessment of the total amount, as it’ll most likely vary from one to another.

After trying to actively sell their paintings to get investors for 7 years, if they don’t come up with ways for shareholders to sell or redeem their respective shares, Masterwork would sell them, maybe at auctions, before/on the 10-year anniversary of the offering. They are also brainstorming ideas to provide liquidity to their investors, including share-selling opportunities via Masterworks Secondary Market. However, they don’t guarantee that this platform would monetize investments properly and even if it does, you may not always receive more than you paid for.