Fractional Ferraris: How A Company Called Rally Is Democratizing The Enthusiast Car Market, One Share At A Time
With some knowledge, capital, and a little bit of luck, it’s possible to make money owning the types of cars that typically connote indulgent reductions in bank account balances. Pick the right vehicle, buy it at a fair price before the demand curve catches up to your prediction, and then sell it later on for more than what you paid; it’s a simple enough strategy, but not necessarily an accessible one. Having the correct opinions on what will appreciate is just one part of the process. A perfect crystal ball is useless if you can’t act on it. In other words, in order to sell something, you need to have bought it.
We’ve all read about the humble prices that now-priceless post-war sports cars traded for in the 1980s at their market’s nadir, but those opportunities are long gone thanks to the accessibility of our collective accumulated knowledge, i.e. the internet. But even at their lowest values that hindsight has since revealed as complete bargains, these cars weren’t being completely given away. Relative to a few million today, a few thousand seems like pennies, but it’s not like every newly licensed teenager back then was driving around in a Ferrari purchased with lawn-mowing money.
So what if you can’t or don’t want to outlay the full amount to buy, store, and maintain a car that you think is going to be worth more later on? Our friends at Rally are offering an alternative to the traditional market for enthusiast cars and collectibles, and in doing so are giving everyone a chance to participate in markets that have traditionally had a very high barrier to entry. The crux of Rally is its ability to offer investors shares of these scarce assets—cars, artwork, vintage watches, rare books, etc.—rather than requiring the full purchase price to place your bet.
This fractional investment process begins with Rally choosing which asset to acquire—let’s say a Ferrari Testarossa, like the blue-on-blue example pictured here (which Rally investors recently cashed out their shares to sell for a world-record price; the car IPO’d at $180k and was sold for $330k). To continue the example, the Rally team finds and purchases a Testarossa, and then creates a holding company specifically for this Ferrari. Then, similar to a private company becoming publicly traded, Rally offers shares of this holding company to investors during an initial public offering (IPO), effectively selling shares of the holding company’s only asset, the Testarossa.
After the IPO, Rally offers existing and new investors the chance to trade shares of the car, just like in the traditional stock market. Rally Market Hours run Monday through Friday from 10:30AM-4:30PM EST, with allowing for limit orders to be placed after hours. You can read more about the details of trading here. Trading continues in this fashion until the Testarossa is eventually sold; throughout the process, Rally is evaluating offers that it receives from parties interested in buying the Testarossa outright (which would return the car from public shareholder to private ownership status).
Rally’s advisory board ultimately decides which offers to accept, but barring extenuating circumstances, their decision to sell or hold reflects the will of the shareholders who vote on each offer. Once the Testarossa is voted to be sold/re-privatized, the holding subsidiary is dissolved and the investors receive payouts based on the number of shares they held at the time of the sale. Rally understands that cars can be more than just fun things to drive. Don’t we like to share auction links and classifieds with our friends? Don’t we all speculate in our heads on where the markets for the cars we love are headed? So in addition to trading shares of company stock, why not also trade shares of things Ferraris and BMWs?
Viewing enthusiast vehicles as investment vehicles is anathema to the “cars were built to be driven” dogma that so many people parrot, but it’s impossible to ignore the reality that there is money to be made trading them, just like there is in the world of art—one can argue that art should never be created explicitly for profit, yet that won’t stop people bidding on Van Goghs. And, importantly, investing in cars doesn’t have to preclude enjoying them for what their utility as a means of transportation. Driving a car doesn’t require driving it into the ground, and if you own something truly special like a McLaren F1 you can even smash it up from time to time as you watch the value continuously climb upwards. Even banged up Nissan 240SX drift specials are selling for more than untouched examples from a few years ago.
Overall prices for enthusiast cars, trucks, and motorcycles have been trending higher at every price point—from the aforementioned F1 to the good old F-150—and in doing so have made these machines less accessible for the younger generations to enjoy. A college kid who spends more time on car sites and forums than on schoolwork might not be able to afford to drive anything at all, but they can still participate in the market and leverage their knowledge and bet on their tastes by buying shares. Even if your transportation consists of a bus pass, you can benefit from the rising prices of analog supercars by buying a piece. Investing in them is just another outlet for being obsessed with cars, we think, and this fractional/shares method serves to democratize one of the most expensive sides aspects to being a “car person.”
If this sounds exciting, there is a great chance to dip into this market, as we’ve partnered up with Rally to give Petrolicious readers and followers $15 toward their first share purchase. This can be used for any Rally offerings, from a first edition of Alice’s Adventures in Wonderland to a genuine triceratops skull, or, something that we’re eyeing ahead of its IPO next Friday, this beautiful black BMW. We’re big fans of the first-generation 8-Series, and this example looks to be a very well cared for example of the highest performing and best-looking model, the V12-powered 850CSi pictured throughout this page. We filmed a similar car a few years ago in Los Angeles—which is embedded below and can be seen here, on YouTube—and we still think that the big coupe is one of the most interesting cars in BMW’s history.
At the time of its reveal in 1992, the peer group for the 850CSi was almost nonexistent. It never claimed to be a sporty two-door made for a mountain pass, yet it could outperform many of the cars that did. The 8er’s true domain was a lengthy trip on roads with enough room to show off how comfortable life can be at well over 100mph; this was the kind of car whose essence was understated, yet its presence never went unnoticed even as it blurred by in the left lane.
Though any form of the E31 chassis was and is a genuine rarity, the CSi stood even further apart. At the time, this was the end-all, be-all, the award-winning stew of a high-tech ecosystem paired to an exotic motor that could push the impressive package well past the imposed safety speed threshold of 155mph. Further boosting the desirability of the CSi model was the inclusion of special staggered forged M-System wheels with the distinctive “throwing star” bladed covers, a more robust and direct suspension, extra interior options, and a host of upgrades to the exterior paneling, as is the fashion for cars with the M treatment.
It was a truly special car, and its production run reflected that. Exorbitantly expensive, and unable to continue production in line with updated emissions standards, only 1,510 units of the model were produced the world over. And to add enthusiast clout to such rarity, each of these cars came fitted with a six-speed transmission bolted to the back of a 5.6-liter, 380-horsepower V12 stamped with the fastest letter in the alphabet. We think this is a lot more interesting than reading about corporate debt structures, what about you?
To learn more about Rally and how to invest on the platform (Rally partners with FINRA-accredited broker-dealers for every asset) the company’s FAQ can be found here.
As mentioned earlier, the offer for Petrolicious readers can be accessed here.