This Otis Review will help you learn more about Otis's investment offerings, including how the alternative investments on Otis are structured, and what your potential returns might be. You can read more about the criteria we use to review investment platforms here.
Otis is a website and mobile app for buying and selling fractional ownership shares in art, sneakers, comic books, and other collectibles. Otis is based in New York, and was founded by Michael Karnjanaprakorn, who previously co-founded ed-tech company Skillshare. Otis offers their investments through SEC Reg A+
Types of investments Otis offers
When you invest on Otis, you’re investing in fractional ownership of a specific collectible or work of art. Typical offerings (Otis calls them “drops”) are items like a 1986 complete Fleer Basketball set, a pair of rare Air Jordan sneakers, or a painting by renowned artist Banksy. According to Otis they intend to hold the items for 3-5 years and then resell at a profit, though they also offer their own secondary market where you can buy and sell individual shares.
In some cases investors will have the opportunity to view the assets they’ve invested in at the Otis gallery in New York.
What do you get when investing with Otis?
When you invest with Otis, you receive a membership interest in an LLC, which is what actually owns the underlying collectible. Prospective investors should note that the LLC owns multiple items (using a separate sub-series for each collectible), rather than the more typical arrangement of a separate LLC (or other special-purpose entity) for each offering. This is becoming a common structure for Reg A+ offerings, but may be unfamiliar to some investors. Investors should review the offering documents in full to be sure they understand how the offering they’re investing in relates to other items (series’) owned by the LLC. Each series is treated as its own separate legal entity under Delaware law, similar to a company subsidiary.
How does Otis make money?
According to Otis, they charge a 0-10% “sourcing fee”, and there is an additional 1% fee (of all the invested capital) to cover the fee paid to their broker-dealer. When an item is re-sold, Otis also retains 10% of the profits before distributing the remainder to shareholders. Notably Otis also purchases at least 2% and up to 19.99% of each offering themselves, at the same price it’s offered to shareholders.
Potential returns and cashflow
The primary gains from an investment on Otis are expected from sale of the asset, following a planned hold time of 3-5 years. Otis provides some historical and benchmark data for similar collectibles, and while – for example – the sale price for a “9.4 CGC-graded Avengers #1 comic” increased from $17,250 in 2002 to $79,000 in 2018, the prices also fluctuated considerably in between (down to a low of $16,963 in late 2002 and up to a high of $130,000 in 2013). Prospective investors should be sure to research the specific asset they’re investing in to understand the likely return potential.
While cash-flow isn’t explicitly part of an investment with Otis, they do indicate that if there is an opportunity to generate revenue from a particular asset (for example, through a gallery showing) that any profit generated will be distributed to shareholders.
Breadth of offerings on Otis
Otis lists 4 key criteria for evaluating potential assets, including that assets are “culturally significant” and “are supported by positive macro trends”. It would be helpful if they provided a bit more detail on what exactly those criteria mean in practice, though they do provide more detailed information about their criteria for Art and Comics in particular.
The selection on Otis is quite large, between active “drops” and assets that have previously sold but are now available for trading through their app.
Investments on Otis are offered through SEC Regulation A+, “Tier 2”. Reg A+ offerings must be registered with the SEC, including detailed offering circulars, and offering firms are subject to a number of financial disclosure requirements.
This review was first published on 17 December 2020.