In the second half of July, anyone with a couple of hundred dollars to spare will be able to buy a share in a Francis Bacon masterpiece: “Three Studies for a Portrait of George Dyer,” finished in 1963. The triptych will become the world’s first painting to go public.
And then it will go to the public—to an as-yet-undetermined museum, where thousands of people can gaze at a canvas that has often hung on the walls of private collectors like Roald Dahl.
The IPO, conducted by a company named Artex, will see “Three Studies” listed on a purpose-devised art exchange based out of Liechtenstein. The listing’s value is roughly $55 million; the painting last sold, at a 2017 auction by Christie’s, for close to $52 million.
From that Christie’s sale, the painting moved into a private collection—which is the fate of many, many works of fine art. Artex’s decision to put its listed works on public display is a boon to art lovers who can see paintings and sculptures that were previously difficult to access—and also to the museums that will host these works.
How does an art IPO even work?
In many ways, an IPO of a painting works the same way as the IPO of a company. At the moment, Artex is offering investors 385,000 shares in the painting (priced at $100 each) through brokers and banks, which represents 70% of all class B shares in the painting. Retail trading will start in late July, and the price of the shares will fluctuate based on supply and demand, just as in the case of Apple or IBM shares.
But while a company’s stock price soars or sinks depending on how well it is doing—how many phones it is manufacturing, say, or how its revenues compare to its losses—a painting doesn’t perform in the same way. In fact, if anything, the value of a rare masterpiece ordinarily just appreciates, year after year. All it has to do is hang on the wall and not get damaged.
Given that, why would retail demand for shares in a Bacon triptych rise or drop significantly at all? One scenario is the potential of a “takeover bid.” As in the corporate world, if a private collector truly wants to own the Bacon, and is willing to buy out all the shareholders for a premium, the stock price will increase. If, on the other hand, an art expert declares the Bacon to be a forgery, the stock price will flatline. That is a particularity that applies uniquely to artworks; its corporate equivalent, though, might be an auditor announcing that a company has cooked its books.
How much art do private collectors own?
It’s difficult to tell how much of the world’s fine art collection lies in private hands, but it’s safe to say that it is considerable. Larry’s List, which compiles data on the art industry, estimated in 2015 that 53% of private collections had more than 500 artworks each. There are at least 8,000 art collectors around the world, and perhaps as many as 10,000.
Many of these holdings are hidden from public view, usually in “freeports”—untaxed havens in various countries in which the wealthy start companies and store their high-net-worth goods. The Economist estimates that freeports in Zurich and Geneva hold “over $10 billion worth of paintings, sculptures, gold, carpets, and other items.”
Private collections presumably include works by Vermeer, Rembrandt, and Picasso that haven’t been seen since they were stolen. But they also include thousands of others that were legitimately purchased for private consumption. If the price is right, these collectors may well sell to Artex, which charges only a 3% fee of the IPO proceeds, rather than the 20% in commission that leading auctioneers levy. And then those works will move into museums, where the rest of us can finally enjoy them.