We’re happy to announce the launch of fraction/al, one of the first platforms focused solely on the creation, exchange, and management of fractional high-value, illiquid assets using blockchain technology.
Over last few years we’ve watched in amazement as the market for tokenized blockchain based assets has exploded. Literally from nothing a few years ago to more than $6 billion in the first 3 months of 2018, but the reality is the majority of utility and security token offerings are nothing more than a good idea and a whitepaper. After seeing this up close we came to the conclusion that the greater opportunity isn’t just in hypothetical businesses but real-world assets. Over the last several months we’ve extensively researched the space and discovered a huge opportunity to fractionalize hard to access assets also known as illiquid using blockchain based technology.
From a high level, an illiquid asset refers to the state of a security or other asset that cannot easily be sold or exchanged without a substantial loss in value. Some examples of inherently illiquid assets include houses, cars, boats, antiques, art, private company interests including sports teams and various types of debt instruments.
Though these items may have inherent value, the marketplace in which they are sold often have few buyers in comparison to those interested in the purchase of more liquid assets. The market for illiquid assets is potentially a multi-trillion dollar market. The global private equity market alone is a $4 trillion.
This is where fraction/al comes into play. Our goal is to use modern blockchain based technology to unlock a vast world of assets that were previously inaccessible. With an initial focus on fractional ownership of professional sports teams, real estate, corporate equities, debt, commodities and other financial derivatives.
Our first offering is focused on the professional sports market. According to Forbes, the cutoff to qualify among the world’s most valuable sports franchises is higher than ever, up 18% 2017 to $1.75 billion. There are 36 franchises worth at least $1 billion that did not make the top 50.
Trouble is, franchises don’t come up for sale very often, and when they do, they’re not cheap: The Los Angeles Clippers, who have the worst cumulative winning percentage in NBA history, recently sold for $2 billion. Two months later, the small-market Buffalo Bills, who haven’t made the playoffs this millennium, sold for $1.4 billion.
No sports league is as profitable as the NFL where the average team earned an operating profit of $91 million and no one made less than $26 million in profits. For sports-obsessed investors who can afford to spend millions but not billions, buying a minority stake, a non-controlling ownership stake is an intriguing option. The number of minority owners in sports has increased in the past decade-plus as franchise sales prices have skyrocketed, but the entry point for even a 1% stake for a team valued at $1.4 billion is still $14 million dollars. With no secondary market the chance to buy or sell a stake is very difficult, if not impossible. fraction/al provides liquidity for minority owners and allows fans a piece of the action and thanks to blockchain technology, the ability to manage thousands of minor shareholders now becomes a possibility.
If that’s not reason enough, since 2000, according to Forbes figures, the average sports franchise has increased 250 percent, with a compound annual growth rate of more than 9 percent, significantly better than the S&P 500’s 3.2 percent.
There are also lots of other perks, minority owners might not be able to make trades or fire the coach, but for a fraction of the investment amount, they enjoy many of the benefits of ownership, like luxury box seats, invitations to team events, and access to current and former players.