✨$T 0188: New Legacy

Last week we quietly launched a new product on Rally called Pre-IPO Group Bidding: a way for small group of committed investors to band together and place a guaranteed bid on ultra-rare collectibles before they ever reach our public IPOs.

If the pool wins an auction, we structure a standard Rally IPO, allocating shares pro-rata at the pre-IPO price and passing any upside to investors through bonus shares. If we don’t win, the principal plus a pre-agreed profit share with the auction house (through our guaranteed bid) is paid out to all participants.

It’s something new for Rally, but the concept of guaranteed bids is not new to auction houses - particularly when it comes to fine art, which has been the primary driver of auction sales for decades.

But thats starting to change.

In this week’s edition of Shiny Thing$, we’re taking a quick look at the ever-shifting landscape of auction houses and how it affects not just Rally, but the entire collectible asset and financial ecosystem. Things may be “down,” but the future looks bright.

Take a Time Machine back to November 2017…

It’s a 40 degree November night, in New York City, and Christie’s is about to auction off one of the most anticipated works of art to ever hit the auction block in front of a packed house.

After 19 minutes of wild back and forth bidding with four bidders on the phone and one in the room, Leonardo da Vinci’s “Salvator Mundi” sold for $450,300,000, absolutely shattering the high for any work of art ever sold at auction. Nearly half a billion dollars. The audience in attendance gasped. 

As art advisor Todd Levin told the New York Times just after the sale “this was a thumping epic triumph of branding and desire over connoisseurship and reality.” Today, we’re reverted back to that “reality.” 

In a market driven by headlines, there have been few headline-grabbing sales since that fateful day. Total auction sales at Christie’s, Sotheby’s and Phillips were down 19% in 2023. In 2024 they that figure jumped to 26%. And even though standard auction sales are only one revenue source for the big houses, private sales are also well off their highs with Christie’s aggregate sales down around 30% over the past two years, from $8.4 to $5.7 billion. Sotheby’s saw an 88% fall in its core earnings last year, but still fairs better than its other legacy competitors after receiving a well publicized $1B investment from Abu Dhabi’s sovereign wealth fund ($800M of which was used to pay off debt on their books). 

So what does it all mean? 

Well, tough times don’t typically last and when the fear index is at its highest, that’s often a buy signal for shrewd investors to make generational buying decisions. 

The core model and the still very well respected big names in the auction space are still in tact. But the fact is that, until now, the auction houses have relied heavily on the art market to provide the bulk of their big ticket sales and drive revenue. According to the luxury investment index in the 2025 Knight Frank Wealth Report, the value of investments in art fell by 18 per cent last year alone.

This doesn’t just affect art collectors - it affects the collective psyche of all auction participants. When the highest end of the art market suffers a pullback, so too do the auction houses that rely on them, across all categories. Earlier this year, Mei & Moses Art Market Consultancy conducted an analysis of the sale prices of more than 50,000 piece of art bought at auction starting in 1970 and then later resold at Christie’s, Phillips or Sotheby’s since the year 2000.Their findings in spring of 2024 stated that the mean compound annual return on those works was down to “almost zero”. In an update in the fall of 2024, they remarked that “for the first time ever, it was negative.” If it doesn’t make money on paper, would anyone really be buying art?

What’s next? It can’t just be Art sales. 

Sotheby’s and Christies in particular have expanded their offerings substantially over the last 3 years in preparation for the future. At Christie’s, non-art auctions are continuing to get attention with 16% their 2024 auction revenue coming by way of handbags, jewelry, shoes, fine wines, whiskies and, classic cars. The world’s oldest auction house actually purchased Gooding & Company, the specialty automotive auction company last year - a move that Sotheby’s made nearly a decade ago when they began purchasing an interest in RM Auctions and partnered with the firm to run their automotive wing under the brand “RM Sotheby’s.” 

There’s also a banking arm to most auction houses these days. Christie’s has both an Art Finance division, which allows clients to borrow against their collections, and a venture capital fund, Christie’s Ventures, which backs start-ups involving “new technologies that impact the art world”. Since the late 80’s, Sotheby’s Financial Services has been originating loans against assets which grew more than 100% to its highest ever portfolio balance between 2022 and 2024. In a statement at the start of 2025, Josh Pullan, global head of Sotheby’s Luxury Division, noted that one of the fastest-growing and most profitable segments for Sotheby’s is loans against automotive assets. The auction house has also launched a media wing which they claim was immediately profitable, and has invested off their balance sheet alongside VC’s in startup fundraising from seed rounds through growth rounds in multiple consumer and enterprise businesses.

On top of that, most houses, most notably Sotheby’s, updated their fee structure over the last year to bring down the buyers premiums associated with auction sales. This is particularly impactful in the non-art market as new buyers for Sotheby’s ancillary categories continue to enter the market. In partnership with the NBA, Sotheby’s launched “NBA Auctions,” a set of game worn jerseys going live online on a regular cadence sourced directly from the league. On any given week, you’ll have jerseys that came off the backs of the biggest stars in the league going live sometimes days after they were worn. This is all part of the auctions house’s initiatives in their Luxury category, which includes everything form sports jerseys to watches to dinosaurs, which serve a dual purpose as a huge content draw across social media to engage a Tounger audience, and a cash cow (last year’s $44.6M Stegosaurus sale and the 13M views of the auction video were both records for Sotheby’s).

All of it is an indication that diversification is a necessity. That diversification is not simply in the price points and categories being sold, but in the offerings to both individuals and institutional partners. For an auction house like Christie’s that was launched more than 250 years ago, it’s a must if they want to last another 250 years. 

As Christie’s chief executive Bonnie Brennan stated earlier this year “Forty-one per cent of our new bidders are millennials or younger. Collectors are changing and it’s important to broaden our audience…we have a long heritage for a reason, it’s because we’re nimble. We evolve.”

At Rally, that market and that evolution is core to our mission and the assets that we continue to source, acquire, and offer to investors. On paper, some of those assets may seem odd for an investment portfolio, or may not have the type of instant volatility that you may see in the crypto to meme-markets. But our position has always been that over time, the best assets in the most alpha-rich categories will deliver the best results. 

As the financialization of nearly everything continues, we’ll continue to not just dig to find that alpha (sometimes literally), but we’ll continue to offer more products like Pre-IPO Bid Pooling to get you in at the earliest point in the process.

The auction houses have begun to make their bets on the future. We’re bringing our chips to the table.

Until next week…