After a slow holiday week last week, there’s been a lot more interesting news this week. We’ve got a rundown of what’s happened so far in July down below.
StartEngine
StartEngine announced a beta version of their secondary market, named “Marketplace.” You can find companies on Marketplace through either searching or exploring an alphabetized list.
We don’t have a count from StartEngine for how many companies are open for trading, but it appears to be a very significant number. We’d estimate it’s in the hundreds and wouldn’t be surprised to learn it was over 1,000.
The process for placing an order is relatively simple. To sell, it does require downloading your subscription agreement from the portfolio page and uploading it in the sale workflow. Additionally, a couple of important notes. Orders must be at least $250, excluding fees. Trading fees are 5% for both buying and selling.
One of the drawbacks of equity crowdfunding investing is the lack of liquidity. Having robust secondary markets would go a very long way towards resolving this.
StartEngine isn’t alone in trying to make strides here. Earlier this year we covered the beta launch of Republic’s secondary market. While that still looks promising, it’s been over 6 months without any significant news. We still have not been accepted into the beta, nor heard any updates on when we might be.
Roofstock (One)
On Thursday, Roofstock announced in an email to investors that they would be shutting down Roofstock One.
Roofstock One was an interesting take on the then still-new trend of fractional real estate investments. Rather than investing in very large real estate funds or individual properties, Roofstock looked to find a middle ground.
Through One there were thematic portfolios that contained multiple properties, typically based around geography. For example, there might be an Atlanta-based portfolio of 5 single family homes. For a single investment, there’s more diversification than in a single property, but the funds are still fairly focused. Additionally, there was one evergreen fund that did invest across a broader section of real estate.
This is potentially just the result of bad timing. Roofstock One launched in late 2021, right before interest rates started to rapidly rise. The combination of the timing of the launch, the fact that it is only for accredited investors, and the availability of other options like Arrived, likely limited demand for this offering.
In order to reach an appropriate scale, One needed to reach $100K in AUM by the end of 2023. The announcement that One will wind down indicates that Roofstock does not believe that was realistically possible.
Roofstock One will soon stop accepting new investment capital, including halting automatic dividend reinvestments. They will also start trying to figure out how to wind down the offering in advance of the automatic termination at the end of 2023. If automatic termination occurs:
… [returns] will be subject to whatever net proceeds are achieved upon ultimate liquidation, which will occur as homes are vacated, renovated, and sold over the course of 2024 and, if/as necessary, 2025.
Roofstock One Wind Down Email
Rally
Last week Rally posted about a new record sale for a rare Pokemon card, the Kangaskhan-Holo Trophy Card. It sold for $175K in an auction. That’s quite the haul. Per rally, there are only 12 copies with a perfect 10 grade from PSA, one of which is on Rally.
Per the tweet, Rally’s copy had a market cap of $95.6K at the close of last week. This brought out a range of reactions.
Some people were heavily encouraged by the news. They suggested that shares on Rally were trading at a hefty discount to the last sale and represented tremendous value.
Another perspective was less positive. If someone wanted the card badly enough to pay $175K for it, why not first offer to buy out the Rally copy for $125K or $150K? Realistically, the buyout would likely have been approved.
We find that question to be quite interesting.
It could simply be that these platforms – which are niche even within the investing world – just don’t currently have a high level of visibility. Maybe the person who paid $175K simply had no idea that Rally existed.
Alternatively, perhaps it reflects a bias on the part of some buyers to avoid purchasing from fractional platforms like Rally. That could be for a variety of reasons, including the time required for voting on the buyout.
Lastly, we do not believe it is accurate to say the card is worth $175K. Ultimately these assets are worth what someone is willing to pay for them. Just because there was one person willing to go to $175K, it doesn’t necessarily mean that there will be another.
Arrived Homes
Arrived Homes released their Q2 performance results this week. They shared a lot of data, so the full blog post is worth a read. We might also do a deeper review of the data at some point as well.
That having been said, here are a few highlights:
- In an improvement from Q1, which saw 35% of properties lose value, only 10% saw a decrease in Q2.
- Properties launched in the past 6-12 months have performed the worst. The range of average performances for each group range from -4.6% to 3.6%.
- Once you get beyond 12 months, however, things have been positive on average.
- Vacation rentals have a 57% occupancy rate as of Q2.
- As there are some murmurs of a slowdown in Airbnb bookings and revenues, it will be interesting to see if this number continues to hold up.
- So far everyone seems to love The Pointbreak, The Palm, and The Hammock. The lowest occupancy rate among those 3 is 82%. That’s over the course of around 6 months for each of them, so it’s not just a short term blip either.
Fundrise
Fundrise has posted their mid-year letter to investors. The letter is a relatively lengthy post breaking down their thesis on what they expect to happen in markets over the coming months, as well as some notes on portfolio performance.
The whole letter is worth a read, but their thoughts on the US economy are the most interesting in our view. Basically, they found that in the case of every recent recession:
- The onset of the recession occurred an average of 10 months after the Federal Reserve stopped increasing interest rates (i.e. interest rates peaked)
- It took an average of 11 additional months (21 total from peak interest rates) for the stock market to bottom.
If this pattern were to play out again, that means the economy, interest rates, and risk assets are likely to see further bouts of high volatility across the next few years.
Groundfloor
Groundfloor announced a new promotion for investors joining the platform from PeerStreet or other qualifying platforms. You can join Groundfloor and earn $100 credit to invest on the platform for every $5,000 invested. To qualify, you’ll need to create your Groundfloor account by September 30th.
The company also shared some high-level performance information for Q2 via Twitter. There were 254 loans closed, representing $43.1M in total repayments to 1,545 investors.
Fundhomes
In a tweet, Fundhomes shared that they received approval from the SEC under Regulation A. That should allow them to offer SEC-qualified, fractional investments to non-accredited investors.
Fundhomes is also focusing on the vacation rental market, bringing another rival for Here and Arrived Homes. We’ll keep an eye on how their early traction looks.
Landa
In a quarterly email update, Landa revealed that they distributed $266K of dividends in Q2. That’s a big jump given Q3 2022 was $144K, Q4 2022 was $156K, and Q1 2023 was $157K. This is undoubtedly related to the launch of so many new properties.
In the same email, they also shared that their new Lend offering had paid its first dividends – $537.
You can also now get a view of your monthly average dividends.
WebStreet
In an email, WebStreet announced a promotion where you can receive bonus shares for investing in WebStreet through an IRA. The promotion is live until July 19th.
Homebase
The crypto-oriented real estate investing platform Homebase announced earlier this month that they now accept payments via wire transfer or debit.
Their second property offering, The Canary is also live for a few more days.
FranShares
Investors in FranShares’s first fund, “TNT Franchise Fund Inc.” will be getting some free swag. Check your inbox for an email from Kenny Rose asking about your mailing address.
