Aron Meystedt is on to something here.
Domain investor Aron Meystedt, who used to sell domains on behalf of Heritage Auctions, is selling fractional shares in the domain name NNR.com.
Meystedt is selling 300 shares in the domain for $100 each, valuing it at $30,000.
He has thought through some of the limitations of this type of deal. For example, he will refund the money if the domain is stolen or lost in a UDRP.
Meystedt is also working on an exchange in which people can sell their shares to other investors.
It’s a good concept and Meystedt appears to be trying it out as a minimum viable product. When expanded further, such a system would allow domain owners to obtain liquidity in their assets that might not sell for a while. It will also allow investors to own a part of domain names they might otherwise not be able to afford.
Whether it’s Meystedt or another existing aftermarket platform, it would be interesting to see this idea fleshed out more. Among the issues a fractional-ownership system will need to address are:
- Legal implications
- Tax implications
- The strike price at which the domain must be sold. Can the main owner deny an offer that would deliver 3x returns to owners?
- Secondary market sales of fractional ownership
- Security/escrow of the domain
- Who should pay for UDRP/legal defense costs
I imagine the legal and tax compliance costs of doing this one-off would be too high, but a platform could make it work.
I would check out crypto.contrib.com/domains They have 130 urls onchain in which you can buy the fractional eshares. Plus is backed by a patent
crypto.contrib.com/domain to buy/earn eshares in anyone of 130 names like LegalChain.com, TravelChain.com, ServiceChain.com, etc..
Now you have multiple people/owners representing the domain and giving exposure to its availability and a possible quicker sale.
While fractional ownership (i.e., ‘tokenization’) seems to be where asset ownership is headed (a topic endlessly discussed at blockchain events), as Andrew says, there are a lot of issues that need to be worked out.
One big issue for investors would be whether a change of control/sale needs to be voted on – and if so, by what percentage of them (51%, 75%, 100%…or does only the principal owner have the right to make that decision?
And related to that, even if everyone votes to sell at, say, $1mm, who gets to (re)vote if the bid comes in below that number, as is normally the case?
Bottom line is that this idea could really take off IF there was a standardized, industry-adopted agreement, as there is in the case of off-exchange derivatives (the ISDA Agreement).
Otherwise, it’ll be a wild west situation, where the person in control will make decisions on behalf of the investing syndicate. And if that person also controls the checkbook (i.e., how expenses are incurred and paid for, and which vendors get selected, etc.)…it will fall apart quickly.
good points gene and governance is always an issue. Transparency and clear rules is also key but not sure any industry agreement would be able to standardize agreements around what?
It also depends on risk/reward and who contributed what /when. As the owner or initial investors should set the stage for that structure and control and long as its clear and code enforceable. At crypto.contrib.com/domain , 130 URLs onchain set at 49% owner, 2% to impact programs written in the code to be distributed upon value contribution. Industry has to change and to start somewhere as few things truly start decentralized. Our challenge is how to go from Centralized to Decentralized so these issues are truly left to solid stakeholders and finds a niche in the crypto ecosystem as well.
Im trying to understand this and I just don’t get it. How do I make money for investing in this? Do I get 10% of whatever it’s sold for? I understand stocks but for some reason this I don’t understand.
Andrew Allemann says
Each share you buy is 1/300th of the domain. So if it sells for $90,000 (after expenses) you’d get $300 per share.
Con– can only make money when it is sold….? unlike buy stocks where you can sell with a click of a button and without any consultations from other memebers except you.
So what happens when you want to sell it 1 mth later?
Can I resell my share for $10000000?
Global Mission says
Jon Schultz says
I like this idea. What I think is reasonable is to guarantee that a domain won’t be sold for less than an amount which would provide a certain minimum profit (maybe 100%), plus that amount should rise every year by a certain percent (maybe 5%).
If the value of a domain goes down, for whatever reason, every investor’s permission should be needed to sell for less than the guaranteed amount. If an investor won’t agree, the other owner(s) have the option of purchasing that investor’s interest at the guaranteed amount.
This sounds very much like fusu.com, a decade-old idea that never really took off. Too many constraints, not enough interest. Makes the decision process significantly more difficult.
didnt have blockchain/smart contracts and the need. Today you have those as well as the need to do something eventually with you domains then just sit on them with crappy ppc or for sale landers… technically, were doing it at crypto.contrib.com/domain but legally we are holding off to avoid those constraints issues.. Interest will pick up when there is an actual solid solution.
Sounds like another cowboys.com style mess. Beyond the initial excitement who wants the hassle of having dozens of people all having a saying a say on one domain?
yep fractional ownership is under securities law. Regulated by the SEC. Called blue sky…So these are unregistered securities that will use a 504 exception. A private placement? All sold unregulated across state lines to unsophisticated not accredited investors?
Yea a great idea who will pay the legal bills which will exceed the value of the domain?
And of course the fractional shares will trade on the secondary market with no liquidity?
This is a great idea! unregistered securities sold to unsophisticated investors across state lines with no legal representation….
Jon Schultz says
If the domain was the only asset of a company (which hopefully would only need to be a partnership, avoiding LLC costs) then the investors would just own a piece of the company. No?
That is exactly what a “security” is. This would need to be licensed. From the site it is pretty obvious zero homework has been done.
Interesting idea. Let’s see where it goes. I see three major issues:
1) costs. – who shares the renewal or custodial costs? They may be small now, but what if this grows into a portfolio of say 10,000 names? If there is a management fee, how will the holding entity and taxes be structured? K1? (Andrew pointed out UDRP/legal costs which are also a concern)
2) Generally, shareholders get a vote to decide how their asset is handled. How will that be structured when say 51% of the owners want to liquidate at a price that 49% find super low? Choice of law? (many other legal questions)
3) This would be a security which means you need to get together with the SEC to decide on a framework. This would require full recognition of domains as property, which I don’t believe all US Circuits have held so far. Also, it will introduce some financial regulation that the domain industry has to brace for in order to be effective.
My bet would be on
10 .com domains for $100 or less.
Much larger buyer pool
Much more liquid
Likely to return higher profit than 1 share
10 .com for $100 or less
Would most likely be a better investment.
Much bigger buyer pool
Most likely higher profit vs 1/300th
It’s not that difficult if you simply follow the legality to protect shareholders interest. For example I owned a portfolio of domains in 2014 and decided to take one of my premium domains Pinup.com and develop it into a collaboration website.
I appointed a CFO ( who held a law & accountancy degree, He registered the name with ASIC ( Australian Securities Investment Commission as Pinup.com Pty Limited ( like other Australian companies) we then appointed high profile front & backend techs from Portland Oregon and set off with Skype meetings, iterations and forward planning. The development went longer than scheduled.
Myself CEO & CFO funded the ongoing cost as a loan until monetisation. We have 50,000 daily users with members taking up 520,000 canvasses
It is now almost 4 years since began and 20% shareholding is currently available ( 400,000) at 20cents each ( minimum of 5% ) as I will resign from position as CEO as I am now 73 and need to look after my health but will keep shares.
Doing it this way everyone is legally protected and can sell shares back to existing shareholders or offer to others.
To Wayne’s point – developed yes
Recent sale of clean.tech @ 30k
Good example of alternatives with a much larger buying pool for a similar return less cost.
Free Markets always lead regulations.
Let’s help build a market place and demand for fractional ownership of domains.
you can do that now at crypto.contrib.com/domain with 130 premium names already in the marketplace and eShares.com for stakeholdership.
Media Code, LLC has about 27 “fractional” domain names in its portfolio ready for the fractional ownership boom! Seeking to sell them all during the boom before the inevitable fractional ownership bust. 🙂
patrick Cowan says