How To Fractionalize An Asset

GM! It's Tuesday, January 17th - Today, we're covering Tesla's 20% price cut, the rich getting richer, a marijuana alternative generating $2b in sales, Ex-FTX CEO starting a blog, Prince Harry's book breaking records, 3D printing on the moon, and how to fractionalize an asset.

- Callum

HEADLINES

Tesla's Big Price Cut Leaves Owners Irate

> Tesla cut the price of its vehicles by 20% in an effort to spur new buyers, leaving current owners irate.

> The richest 1% amassed two-thirds of the new wealth created in the last 2 years, with a total of $42T in new wealth created since 2020, with $26T (63%) going to the top 1%.

> Detla-8 THC generated $2B in sales as an alternative to traditional marijuana.

> Microsoft to invest $10b in ChatGPT, but it's unclear what products it will build.

> Airbus is testing out autonomous flying technology in some of its aircraft.

> Disgraced FTX CEO Sam Bankman-Fried, currently under house arrest on $250m bail, is writing a newsletter about his defense.

> Prince Harry’s memoir, Spare, sold 1.4m+ copies, breaking sales records.>

> Twitter shut down its API, cutting off several third-party apps.

> Texas-Based 3D printing company is partnering with NASA to put buildings on the moon

> Alarmed by A.I Chatbots, Universities are revamping how they teach

> Bitcoin is up 26% this month as over $200b in market cap floods back into the crypto market.

FEATURE

How To Fractionalize An Asset

I just bought a $1.45m house in Sedona, AZ, that makes ~$31,000/mo in rental income. But I didn't buy it alone. I invested alongside 2,394 other investors Here.co platform.

What's The Business?

Here.co uses asset fractionalization to let anyone invest in income-producing vacation rentals for as little as $100. It raised $5m in late 2022 and reached a $3m/yr revenue run-rate.

How Do They Win?

Fractional ownership lowers the barrier to entry for retail investors to access previously unobtainable asset classes. There are millions of non-accredited investors who previously had no access to these types of investments. By using asset fractionalization, you unlock this pent-up demand.

It turns out it's not as complex as you may think. Here's how to fractionalize a real estate asset:

1. Find assets: Look for unique properties In high-demand vacation destinations.

2. Establish a holding company: They then establish a holding company, like an SPV (special purpose vehicle) or LLC/corporation. This company will take ownership of the asset (e.g., Vacation Rental, business, etc.).

3. Apply for SEC approval under Regulation A: This regulation allows companies to offer and sell securities to the public but with more limited disclosure requirements than what is required for public companies.

4. Securitize it: Then establish a security offering structure for the holding company and finalize offering documentation.

5. Raise money: With the asset fractionalized and the infrastructure in place, you can now market equity in the security (e.g., vacation rental) to investors.

There's A Playbook?

It turns out that there are a lot of platforms (like Dalmore Group) that power the back end for these asset fractionalization startups.

Because they unlock untapped demand, they can get big pretty fast:

• Masterclass (raised $110m) - Invest in rare art.

• Rally (raised $100m) - Invest in collectibles.

• Otis (acquired by Public.com) - Invest in alternative assets

• FranShares - Invest in franchises

Future Opportunities

Fractionalizing assets is only getting easier as more infrastructure companies (like Dalmore) enter the market.

There are still hundreds of assets that are currently inaccessible to the majority of retail investors.

1) Find high-performing assets (Art, precious metals, real estate, private equity, debt positions, SaaS rollups).

2) Fractionalize it (Broker-Dealer, SEC approval, Transfer agents, etc).

3) Operationalize and build a passionate investor community.

ON TREND

Morning Brew Acquired Digital Media Startup Our Future

Morning brew announced its acquisition of OurFuture, a digital media startup that produces short-form business video content and helps large companies thrive on emerging platforms.

Our Future has accumulated 1b views and a following of 1m people targeting Gen Z across TikTok, Instagram, YouTube, and Snapchat.

As a sub-brand of Morning Brew, Our Future will expand its short-form video series and develop a broader portfolio of IP with long-form videos and podcasts.