On Monday, Sotheby’s announced it had brokered a $1.8 million sale of Kanye West’s Nike Air Yeezy 1 sneakers, making them the most expensive pair of (known) shoes to sell, ever.
But the sneakers weren’t purchased by a footwear-loving collector. Instead, they were acquired by the company Rares, which plans to fractionalize pieces of the shoes as an investment.
Rares is one of dozens of similar companies that have sprung up in recent years, all of which offer shares in luxury goods, artworks, and collectables. While the primary draw of these objects (enjoying them, touching them, seeing them, driving them) remains out of reach for fractional ownership sites’ users, their investment potential is, suddenly, available to the masses.
“Kanye is an iconic figure, no matter what people think about him personally,” says Gerome Sapp, the chief executive officer and co-founder of Rares. “We just felt like this shoe was the catalyst for what we wanted to do in terms of fractional ownership.”
Shares in the sneakers will be released on June 16 and will be one of Rares’s first offerings. The site was founded roughly a year ago and has backers that Sapp says include the W Fund and the Urban Capital Network.
While he declines to say how many shares of the Yeezys will be offered and at what price, “I know that we’re going to IPO this for what we paid for it,” Sapp says. “There will not be a premium on it,” meaning the company won’t be making a profit on the release.
In that respect, Rares isn’t as much the buyer of the sneakers as their underwriter, though the $1.8 million valuation could be perceived as a marketing expense to sign up users as much as it’s an indication of an existing market: It’s almost triple the previous public sales record for a sneaker. “People will look at it however they want to,” says Sapp. “For us it was an opportunity to buy an iconic sneaker.”
Still, he acknowledges that “there’s no guarantee that the market will pay us what we paid for it. We thought that this is what the shoe is worth, and more importantly, we want to bring this to the culture and community that have been priced out” of the high-end shoe collectables market.
The Nike Air Yeezy 1s were prototypes worn by West during his performance at the 50th Annual Grammy Awards in 2008 and served as a teaser for the 2009 launch of West’s line, which now has billions of dollars in annual revenue. “This sneaker really set the tone,” says Sapp. “It was the first time an artist, instead of an athlete, got a shoe like this.”
A Boom Market
Rares’s acquisition is the latest benchmark in the collectable market, which has seen an explosion in prices. Last year a pair of sneakers worn by Michael Jordan set an auction record at Sotheby’s when they sold for $560,000, only to be quickly eclipsed by another pair of Jordan’s sneakers that were purchased a few months later at Christie’s for $615,000.
Those prices are fueled, at least in part, by the concurrent boom in the fractional investment market in collectables: Those Michael Jordan sneakers at Christie’s, for instance, were purchased by a collector who flipped them to the fractional investing site Otis, which then put them on the market with a $700,000 valuation and sold shares in the sneakers at $10 apiece.
But it’s not only good news: There are some indications the market could be cooling. Take the 1985 Air Jordans that Sotheby’s sold for $560,000 in May; another game-worn pair from the same period came up for sale in October at Heritage Auctions and sold for just $117,000.
“From where I’m sitting, and this is a good seat, this market is going nothing but up,” says Sapp. “You might get a downtick in one purchase, but overall, the sneaker market is doing great.”
By: James Tarmy