YieldTalk news and links - 21 November 2021

This week: Invest in a portfolio of video games; throwing a penalty flag on the 🏈 Packers' "investment" offering; big investors see big opportunity in climate-tech startups

by Andrew Savikas
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Archival photo from the New York Times of a man browsing an old-timey newsstand

New/Updated Platform Reviews

Real estate investment platform Roofstock, a marketplace for buying and selling single-family rental properties, has launched Roofstock One, a way to invest in fractional shares of a portfolio of single-family rental properties. Investors can tune their portfolio across multiple markets based on investment goals. Roofstock’s marketplace model is open to everyone, but Roofstock One is limited to accredited investors. Our rating: Excellent.


Notable offerings

  • 🎮 Republic is offering investment in a portfolio of video games from their subsidiary Fig, which will select titles to include in the portfolio twice a year. The minimum investment is $1,000, and the offering is open to all investors. More at Republic
  • YieldStreet is offering a diversified portfolio of structured notes issued by Goldman Sachs, with a targeted yield of 10.5%-11.5% and built-in downside protection. Minimum investment is $15,000, open only to accredited investors. More at YieldStreet
  • YieldStreet is also offering a tech-themed portfolio of structured notes with an 11-12% target yield. Minimum investment is $15,000, open only to accredited investors. More at YieldStreet
  • 🖼️ Masterworks is offering fractional investment in ‘Silver Nets’, a 2011 piece from artist Yayoi Kusama, “a global cultural icon, admired for her installations and longtime exploration of minimalist abstractions, which began in the late 1950s.” Open to all investors. More at Masterworks

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🎉 As a reminder, Hedonova is still offering YieldTalk readers a $50 sign-up bonus for new investments in their alternatives hedge fund, which is effectively an immediate 5% return on a $1,000 investment 📈. Click here to claim your $50 bonus 👈


Worth Reading this Week

A roundup of insights and interesting links from around the investment crowdfunding ecosystem.

🏈 The rise of investment crowdfunding has seen the “fractionalization” of ownership of a wide range of new and interesting assets that used to be primarily owned by individuals (for example, fine art or farmland). So news that the Green Bay Packers were launching a “stock sale” of new shares in the team (for $300 each) sure seemed like another example of an interesting asset made more accessible. But as a reminder of why it’s always important to read the fine print before investing, it turns out these ownership “shares” have some important limitations: they cannot be traded, they do not appreciate over time, and they confer zero governance rights. Put another way, those $300 shares are just $300 donations. Read those offering docs before you invest!:

If your average NFL or NBA or MLB team asked its fans for donations, they’d rightly be laughed out of the room—imagine sending James Dolan and Cablevision $300 because you’re a Knicks fan. The Packers get away with it because they’ve managed to brand it extremely well, but that doesn’t make it any less weird for them to take people’s money under the guise of public ownership.

Startups

🌱 Startup investing involves finding attractive industries (with room for many companies to grow and thrive) as much (or more so) than it is about evaluating individual companies. Blackrock CEO Larry Fink says that the next 1,000 billion-dollar companies will come out of climate tech:

“It is my belief that the next 1,000 unicorns — companies that have a market valuation over a billion dollars — won’t be a search engine, won’t be a media company, they’ll be businesses developing green hydrogen, green agriculture, green steel and green cement,” Fink said Monday at the Middle East Green Initiative Summit in Riyadh, Saudi Arabia.

And Larry Fink isn’t the only one growing very bullish on investment opportunities in climate-related companies. Noted investor Jeremy Grantham says this is a generational opportunity for investors, and he’s putting his (very big pile of) money where his mouth is:

“This is going on as far as the eye can see. It’s an unfair advantage for green investing. There may be a bubble that will affect this for a year or two, but it will come back bigger and better than other groups because of this tailwind. This is going to be the most important investment theme for the rest of your life,” he told Bloomberg. About half of the $1.4 billion in assets Grantham manages across a foundation, charitable trust, and his personal holdings is slated for green venture investments, according to Bloomberg. In particular, he said he is looking for “neglected climate opportunities” that “have the potential to change the world.”

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An accepted narrative around disruptive tech startups operating in a highly regulated environment is that some amount of envelope pushing is necessary to overcome the inertia of the status quo (the canonical example of this is Uber’s willingness to launch in many markets). Crypto lending platform Blockfi (read our review) continues to face some regulatory pushback, even as they insist they’re being cooperative (and as they make moves to reinforce legitimacy, like their recent partnership with Visa to launch a credit card offering 1.5% Bitcoin rewards):

The SEC wants to know whether New Jersey-based BlockFi’s accounts are similar to securities and should thus be registered with the agency, a person familiar with the investigation told Bloomberg. BlockFi says it pays annual yields up to 9.5%, compared to 0.06% for bank savings accounts.

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Following the success of direct-to-consumer brands like Warby Parker and Dollar Shave Club, mail-order startups soon sprung up in dozens of product categories, with many learning the hard way that what worked just fine for early entrants offering things that are relatively easy to ship doesn’t necessarily translate to things like mattresses. As a cautionary tale about potential risks even for early investors, look no further than mail order mattress company Casper, whose one-time $1B valuation has plummeted to just $286M, leaving early backers underwater:

Even after Durational Capital Management announced plans to take the company private Monday in a deal offering more than double Casper’s Friday share price, the new premium still fails to make those who led its Series A and Series B rounds whole again.

Real Estate

A new report out from real estate data firm Yardi Matrix looks at the top 19 markets for rent growth among multi-family properties, which continue to see record rents:

As has been the trend for months, multifamily rents continued to set new records in October, reaching a new nationwide average high of $1,572 a month … That figure marked a 13.7 percent increase compared to October 2020. The increase in rents coincided with an increase in occupancy at stabilized multifamily properties to a record-setting 96.1 percent.

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🛬 As the US gradually re-opens to more foreign visitors, US commercial real estate is seeing an influx of pent-up demand from international investors:

“The U.S. as a whole remains one of, if not the most sought-after global real estate market that is backed by the strong fundamentals and economic strength of the recovery coming out of the pandemic,” says Richard Stevenson, managing director of global cross border investment at Savills. Global investors searching for yield were targeting U.S. real estate in a low interest rate environment was a common theme prior to the pandemic. That interest is likely to return and be bolstered by the current inflationary environment. Across different international capital sources, the attraction to U.S. real estate spans all major markets, asset types and risk profiles, he adds.

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According to Zillow, the residential housing market is cooling (if slightly) and looks to be settling into a new normal:

Home values didn’t drop in any of the 50 largest U.S. metros, but monthly home value growth decelerated in 42 of them. The slowest monthly growth was seen in Milwaukee (0.1%), San Francisco (0.3%), Buffalo (0.3%) and St. Louis (0.4%), while the fastest was in Raleigh (2.7%), Nashville (2.4%) and Atlanta (2.3%). Still, even as the overall slowdown in the market continued, October also provided early indications that the slowdown in home value growth is itself slowing down: the decline in monthly ZHVI growth was slightly smaller than the decline recorded in September from August.

Litigation Finance

Litigation finance platform LexShares (read our review) released their quarterly litigation finance market outlook, noting the continued influx of new players. It’ll be interesting to see if performance declines as more capital chases a finite number of litigation claims:

The third quarter saw several new market entrants as institutional investors continue to find additional entry points in litigation finance. The largest new entrant to make its debut was Pretium Partners, a New York-based investment management firm with more than $26 billion in assets under management. Pretium’s entrance into the market fits squarely with several trends we have previously discussed, including multi-strategy asset managers looking for exposure to litigation-related assets, new market entrants looking to transact large deals, and a cohort of more sophisticated human capital entering the market.


Odds and Ends


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