Masterworks.io, LLC (together with its affiliated entities, collectively “Masterworks”) operates a website at www.masterworks.io (the “Site” or “Masterworks Platform”). The information contained on the Site neither constitutes an offer for nor a solicitation of interest in any securities offering. If an indication of interest or reservation is provided, it may be withdrawn or revoked, without obligation or commitment of any kind prior to being confirmed by the investor and accepted by Masterworks and any offer, solicitation or sale of any securities will be made only by means of an offering circular, private placement memorandum, or prospectus. Any person considering investing in an offering referenced on the Site should carefully review the documents on file with the Securities and Exchange Commission (the “SEC”) relating to such offering. An exempt offering of interests pursuant to Regulation A will only be made pursuant to the Offering Circular and subscription documents. The Site contains active hyperlinks to such information and it can be found under the name of the respective issuer entity on www.sec.gov. None of the information on the Site or in other promotional materials distributed by Masterworks is a substitute for such detailed information filed with the SEC (“SEC Materials”). We refer to SEC Materials together with all information on the Site (including this Important Disclosure) and other promotional materials distributed by Masterworks as “Materials”.
The information contained herein will be qualified in its entirety by reference to the SEC Materials other agreements and documents referred to therein, which contain additional information about the investment objective, terms, risks, and conditions of an investment.
Nothing contained herein shall be deemed to be binding against, or to create any obligations or commitment on the part of, any potential investor, the offering sponsors, or the respective affiliates. No person has been authorized to give any information or make any representation or warranty regarding the subject matter hereof, either express or implied, and, if given or made on this website, in other materials, or verbally, such information, representation, or warranty cannot and should not be relied upon, nor is any representation or warranty made as to the accuracy, content, suitability, or completeness of the information, analysis, or conclusions, or any information furnished in connection herewith contained in this presentation.
Past performance is no guarantee of future results. An investor can lose money. Diversification and asset allocation do not ensure a profit or guarantee against loss. Investment decisions should be based on an individual’s own goals, time horizon, and tolerance for risk.
Independent Brokerage Solutions LLC (“IndeBrokers”) is acting as an underwriter on behalf of Masterworks issuers and equity securities are offered through IndeBrokers. No offering will be made in any jurisdiction where such an offer or solicitation is not lawful or is prohibited or, where IndeBrokers is not a registered broker-dealer. IndeBrokers is a member of FINRA and SIPC.
Independent Brokerage Solutions LLC is located at 485 Madison Ave, 15th Floor, New York, NY 10022.
Masterworks.io and its affiliates are independent and unaffiliated with IndeBrokers. Any securities transactions or related activities offered by Masterworks.io associated persons are conducted in their capacities as registered representatives of IndeBrokers, or in their capacity as a “principal” to the transaction pursuant to SEC Rule 3a4-1.
No money or other consideration is being solicited, and will not be accepted without such potential investor having been provided the applicable offering document. Joining the Site neither constitutes an indication of interest or reservation of shares in any offering nor involves any obligation or commitment of any kind.
There can be no assurance that an investment mix or any actual performance shown on the Site will lead to the expected results shown or perform in any predictable manner. It should not be assumed that investors will experience returns in the future, if any, comparable to those shown or that any or all investors on the Site experienced such returns.
The information presented on the Site regarding each offering merely constitutes a summary of such information and is qualified in its entirety by the disclosure contained in each issuer’s offering circular available on the Site. There can be no guarantee that any offering available on the Site will achieve its business objectives or that a painting will appreciate in value or be able to be sold.
Offers to sell, or the solicitations of offers to buy, any security can only be made through official offering documents that contain important information about risks, fees and expenses. Investors should conduct their own due diligence, not rely on the financial assumptions or estimates displayed on the Site, and are encouraged to consult with a financial advisor, attorney, accountant, and any other professional that can help you to understand and assess the risks associated with any investment opportunity.
Neither the SEC nor any state securities commission or regulatory authority approved, passed upon or endorsed the merits of any investment on the Site. Each investor should always carefully consider investments in any security and be comfortable with his/her understanding of the investment. Investors should not construe any Materials as tax, legal or investment advice. Investors are urged to seek independent advice from their own advisors for legal, tax or investment advice.
All product names, logos, and brands are property of their respective owners. Use of these names, logos, and brands is for identification purposes only, and does not imply endorsement or affiliation.
Services available on the Site do not constitute “crowdfunding” as described in Title III of the Jumpstart Our Business Startups Act (“JOBS Act”). Masterworks is not registered as a broker-dealer and is not a member of FINRA. Masterworks is not registered as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”) and the membership interests do not have the benefit of the protections of the Investment Company Act. Furthermore, Masterworks is not registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”), and the members of Masterworks issuers will not have the benefit of the protections of the Investment Advisers Act. Neither FINRA, the SEC or any other regulatory organization endorses, indemnifies, or guarantees the business practices of Independent Brokerage Solutions LLC, selling methods, the shares or any offering referenced on this website. The SEC does not pass upon the merits of or give its approval to any securities offered or the terms of any offering, nor does it pass upon the accuracy or completeness of any offering circular or other solicitation materials.
No offeree will be accepted as a subscriber who does not make the representations set forth in the subscription agreement accompanying each Memorandum or Offering Circular, including, when applicable, the representation that such offeree is an accredited investor and is acquiring the membership interests for investment and not with a view to resale or distribution thereof in violation of applicable securities laws, and, when applicable, that the investment amount does not exceed 10% of the offeree’s net worth or annual income. Investors also will be required to represent that they are familiar with and understand the terms of each relevant offering, among other things. Investors may also be required to provide additional information to verify their identity or investor status.
The shares will not be offered or sold to prospective investors subject to the Employee Retirement Income Security Act of 1974 and regulations thereunder, as amended (“ERISA”).
This Important Disclosure is deemed to be incorporated by reference in its entirety into any social media communication, advertisement, email or other communication which contains a link to this page at www.masterworks.io/about/disclosure.
Masterworks buys individual paintings using its own sources of capital, often through pre-auction guarantee bids on works sold by major auction houses. Once a bid for an artwork is accepted, a Delaware limited liability company is formed for the specific purpose of conducting an offering through the Masterworks Platform, acquiring, maintaining and eventually selling, the artwork. Once an issuer has been formed, an offering circular is prepared and filed with the SEC for an offering pursuant to Tier II of Regulation A of the Securities Act of 1933, as amended, (the “Securities Act”) and Masterworks begins marketing the Regulation A offering through “testing-the-waters” materials, which provide that:
No money or other consideration is being solicited for our Regulation A+ offering at this time and if sent in to Masterworks will not be accepted. No offer to buy securities in a Regulation A+ offering of Masterworks can be accepted and no part of the purchase price can be received until the Masterworks issuer’s offering statement has been reviewed by the SEC. Any such offer to buy securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance. Any indications of interest in Masterworks’ offering involves no obligation or commitment of any kind. No subscriptions or funds can be accepted until the offering has been reviewed by the SEC.
Masterworks may also conduct private placements pursuant to Rule 506(c) of Regulation D of the Securities Act to accredited investors who are willing to make large investments. Any such private placement will be made pursuant to a private placement memorandum.
After the Regulation A offering is reviewed by the SEC and the SEC has indicated it has no further comments, the issuer will collect subscriptions through the Site and once the issuer has received sufficient subscriptions to close the Regulation A offering and the private placement, if any, the issuer will issue shares to the subscribers and acquire the painting from Masterworks in exchange for the proceeds from the offering and the concurrent private placement, if any. If the proceeds are insufficient to pay for the painting and any fees, if any, Masterworks will be issued shares with a value equal to the shortfall.
Affiliates of Masterworks will contractually agree to maintain the artwork and perform administrative services on behalf of the issuer, including the payment of ordinary costs and expenses and all offering costs, in exchange for certain compensation described below under the heading “Masterworks Compensation”. A copy of the this agreement, usually referred to an Administrative Services Agreement, is filed with the SEC as part of the SEC Materials for each offering and is available at www.sec.gov. Masterworks issuers are prohibited by their operating agreements from issuing equity, incurring debt or participating in any business activities, except as described in the SEC Materials. A copy of the operating agreement for any particular issuer is filed with the SEC as part of the SEC Materials for each offering and is available at www.sec.gov.
The publicly filed offering circulars of Masterworks issuers, not all of which may have completed review by the Securities and Exchange Commission, may be found at www.masterworks.io or at www.sec.gov. In addition to the offering circulars, it is important to note that we also publicly file material contracts, organizational documents, consents, legal opinions and other materials. All of such information is available at www.sec.gov.
Offerings referenced on the Site are being conducted pursuant to Tier II of Regulation A under the Securities Act of 1933. Prior to acceptance of subscriptions any offering we are permitted to “test-the-waters” through online advertising to gauge whether there is sufficient investor interest in the offering, however, we cannot accept payment or any binding obligation to purchase securities in an offering until an offering circular related to such offering has been reviewed by the SEC. Offerings appearing on the Site may be in one of three stages:
In addition, it is possible that after an offering is commenced, we need to update the offering circular to add or update material information, in which case we may be required to suspend accepting subscriptions until such revised offering circular has been reviewed by the SEC.
It is important to understand that the SEC does not pass upon the merits of or give its approval to any securities offered or the terms of any offering, nor does it pass upon the accuracy or completeness of any offering circular or other solicitation materials.
If you are interested in investing in an offering, you should carefully review the offering circular and other materials filed with the SEC before making an investment decision. It is important to note that information contained in a preliminary offering circular (i.e. Stage 2) may change and such changes could be material, so even if you have reviewed a preliminary offering circular, it is critical to review the most recent offering circular on file with the SEC prior to subscribing for shares and tendering payment.
Although the offering structure is similar in many respects to an initial public offering of shares in a public traditional offering, there are important differences between a Regulation A offering referenced on the Site and a traditional public offering, including, without limitation, the following:
Limited Disclosure – Disclosure rules applicable to issuers under Regulation A are more limited in scope than those applicable to issuers pursuing a traditional public offering, so there may not be as much information included in the offering circular for an offering referenced on the Site than there would be in a prospectus. In addition, ongoing SEC reporting obligations for Regulation A issuers are also more limited than requirements for typical companies.
Not Subject to 34’ Act Reporting; Proxy Rules, Insider Reporting – Traditional publicly traded companies are subject to certain ongoing financial and material event reporting requirements, proxy rules relating shareholder votes and reporting of transactions by insiders. These requirements are not applicable to issuers of securities pursuant to Regulation A, provided they comply with certain requirements which Masterworks intends to comply with.
Less Restrictive Corporate Governance – As a non-listed company conducting an exempt offering pursuant to Regulation A, Masterworks issuers are not subject to a number of corporate governance requirements that would apply to companies listed on national securities exchanges, including the requirement to have a board of directors with a majority consists of “independent” directors, independent committees and internal controls audits. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of a company listed on a national stock exchange.
Lack of Liquidity – Traditional initial public offering issuers list the shares on a national securities exchange that makes it relatively easy for market participants to trade the securities. The shares offered by Masterworks will not be listed on a national securities exchange and may be illiquid. Accordingly, investors must be prepared to hold their investment for an indefinite period.
Investing in Masterworks issuers involves a high degree of risk. BEFORE INVESTING IN ANY MASTERWORKS ISSUER, YOU SHOULD CAREFULLY REVIEW THE “RISK FACTORS” SECTION OF THE APPLICABLE OFFERING CIRCULAR FILED WITH THE SEC AND AVAILABLE ON THE SITE OR HERE. In addition, you should consult your own counsel, accountant and other advisors as to legal, tax, business, financial, and related aspects of an investment in a Masterworks issuer Set forth below is a summary of certain risks that should be considered, but this summary is not a substitute for the more extensive and specific language included in the offering circular for any particular Masterworks issuer.
We Have an Unproven Business Model. Our business model includes unique features that are untested and may not be successful. If our business model fails, Masterworks Issuers may be compelled to auction off artwork at an inopportune time, which could result in losses.
Masterworks Issuers do not Expect to Generate Revenues. Masterworks issuers do not expect to generate revenue, so investors will only recognize a return on their investment if the painting is sold or they are able to sell their shares and must be prepared to hold their investment for an indefinite period.
Each Issuer is Undiversified. Investing in any given Masterworks issuer is highly risky since 100% of such investment is concentrated in a single artwork.
Your Ability to Trade Shares is Highly Uncertain. There is no active public market for Masterworks shares and an active trading market may not ever develop or, even if developed, may not be available to all shareholders, may not be sustained or may cease to exist. Although Masterworks is trying to develop a bulletin board to provide liquidity to investors, there can be no assurance that it will be successful. In addition, Masterworks issuers impose restrictions on the transfer of Masterworks shares. Accordingly, you should consider the resale market for Masterworks shares to be severely limited, as you may be unable to resell your shares without significant expense, or at all.
Artwork may be Sold at a Loss. A painting can decline in value and investors in Masterworks shares may lose all or a significant portion of their investment. Even if the artwork appreciates in value, the rate of appreciation may be insufficient to cover costs and expenses.
Illiquidity. Masterworks issuers intend to hold paintings for many years and the creation of a trading market for the shares that will generate sufficient volume to facilitate price discovery is uncertain. If a liquidity option for the shares (such as a trading market or bulletin board) is unavailable to shareholders after seven (7) years, Masterworks will endeavor to liquidate the artwork and will then have up to two (2) additional years to execute such sale, there can be no assurance that a sale will take place. Investors should be prepared to hold their investment for an indefinite period of time, as there can be no assurance that the shares can ever be tradable or that the painting can be sold.
Costs Will Diminish Returns. Fixed costs, such as financing fees and administrative services fees paid to Masterworks and variable costs, such as Masterworks profit sharing and third party costs to sell the painting will reduce overall returns on invested capital.
Investing in Art is subject to Numerous Risks. These risks include, without limitation (i) claims with respect to authenticity or provenance, (ii) physical damage due to improper storage, poor workmanship, accidents, theft, natural disasters, fire, etc., (iii) legal challenges to ownership, (iv) market risks, (v) economic risks and (vi) fraud.
Art is Illiquid. Art is a highly illiquid asset and we cannot guarantee that there will be a buyer at any reasonable price or within any given time frame.
Trends. Temporary consumer popularity or trends among collectors may lead to short-term or temporary price increases, followed by decreases in value. Trends are difficult to predict and may adversely impact our ability to sell an artwork.
Claims. Buying and selling artwork can involve potential claims regarding title, provenance and or authenticity of the artwork. Costs associated with litigation and or settlement are the responsibility of each Masterworks issuer.
Insurance Coverage May be Insufficient. Insurance coverage may expressly exclude damage caused by war, title claims, losses caused by chemical or biological contamination and certain other potential loss scenarios. In addition, coverage limits at any point in time may be below fair value. Issuers are totally reliant on Masterworks. Masterworks issuers have no liquid capital resources and are 100% reliant on Masterworks to maintain and eventually sell the artwork. Masterworks relies on a single investor, Scott Lynn, for substantially all of its capital and liquidity. If Scott Lynn were to cease funding Masterworks for any reason, Masterworks may not be able to identify additional sources of capital.
Masterworks has Potential Conflicts of Interest. Masterworks earns fees and incurs costs for administering Masterworks issuers and may seek to earn transactional fees from trading in Masterworks issuer shares. Masterworks interests and the interests of its Board of Managers and officers may not always be aligned with your interests.
Liquidation Timing is Uncertain. There can be no assurance as to the timing of a liquidating distribution or that a Masterworks issuer will pay a liquidating distribution at all.
Materials may include estimates of historical appreciation rates based on publicly available historical auction sales data for similar objects. These appreciation rates may be presented in graphs, charts, diagrams or as stand-alone statistics and may be presented as a trendline relating to certain segments of the overall art industry, a particular artist or a particular set of paintings selected for their similarity to a specific painting offered through the Site. Art sales price data is used for comparative modeling purposes only. Each painting is unique and historical performance trends of a group of selected artwork is not a direct proxy for historical price performance of any specific painting or any investment in securities referenced on the Site. There is no current market for any securities referenced on the Site and any investment in such securities will reflect costs and fees described in SEC Materials that are not reflected in the index.
All historical price information has limited utility to predict future price performance and future sales price trends may differ materially from, and be lower than, historical returns.
Masterworks strongly cautions investors not to place undue reliance on historical data presented and we note the following:
HISTORICAL SALES PRICE TRENDS ARE USED FOR COMPARATIVE MODELING PURPOSES ONLY. FEES, EXPENSES AND OTHER FACTORS WILL CREATE SIGNIFICANT DIFFERENCES BETWEEN THE PERFORMANCE OF AN IINVESTMENT IN MASTERWORKS SHARES AND THE GROSS RETURNS REFLECTED IN THE HISTORICAL ART SALES PRICE DATA REFLECTED ON THE SITE.
INVESTORS ARE CAUTIONED THAT NO SELECTION OF SIMILAR ARTWORK IS DIRECTLY COMPARABLE TO THE PERFORMANCE OF ANY SPECIFIC ARTWORK OR INVESTMENT SINCE EACH ARTWORK IS UNIQUE AND HAS ITS OWN UNIQUE RESULTS AND VOLATILITY, AND SUCH HISTORICAL DATA FOR A SELECTED GROUP OF ARTWORK, IF SHOWN, SHOULD NOT BE RELIED UPON AS AN ACCURATE COMPARISON. AVERAGE RATES OF APPRECIATION REFLECTED IN A TRENDLINE FOR SIMILAR WORKS OF ARTMAY NOT BE REPRESENTATIVE OF THE PERFORMANCE OF ANY SPECIFIC ARTWORK.
THE FUTURE IS NEVER THE SAME AS THE PAST. PAST APPRECIATION RATES MAY NOT BE INDICATIVE OF FUTURE APPRECIATION RATES AND ANY EXPECTED RETURNS OR PAST RETURNS MAY REFLECT THE PERFORMANCE OF ARTWORK FOR A FINITE TIME, OR DURING A PERIOD OF EXTREME MARKET ACTIVITY. ALL INVESTMENTS INVOLVE RISK AND MAY RESULT IN PARTIAL OR TOTAL LOSS.
Compiling meaningful price appreciation data for artwork is inherently difficult and prone to a number of significant limitations and subjectivity that significantly limit the utility of such data in evaluating future appreciation rates. Difficulties arise due to the unique nature of each painting, coupled with the fact that paintings tend to sit in collections for many years, if not several decades, which most often makes it impossible to find sufficient recent actual sales data to establish an appreciation trend line. To try to estimate how much a specific painting has appreciated over time often requires extrapolation to sales data from a set of similar works by the same artist. The selection criteria for what constitutes a “similar” work are highly subjective and even experts would likely disagree on exactly which particular works or characteristics, such as size, colors, subject matter, condition, etc. should be included or excluded in any given comparative data set. The level of subjectivity involved differs depending on the uniqueness of the underlying artwork. Furthermore, private sales data, which includes a majority of sales, is often unavailable or inaccurate, so the data set is typically comprised of only public auction sales data. The availability of public auction data varies by artist. As a general matter a larger data set is more useful than a smaller data set. There can be no assurance that an investment mix or any actual performance shown on the Site will lead to the expected results shown or perform in any predictable manner. It should not be assumed that investors will experience returns in the future, if any, comparable to those shown or that any or all investors on the Site experienced such returns.
The Site may contain fictional charts, diagrams, drawings and illustrations to provide a visual representation of an idea, concept or process. These fictional illustrations can be easily identified as such as they will typically indicate that they are presented for illustrative purposes only and, in contrast to actual charts, diagrams, graphs and non-fictional data, will not include a reference to any specific source of data. Any numbers, percentages or statements set forth in connection with fictional illustrations are also provided solely for illustrative purposes only and or as an example of one possible outcome. Fictional illustrations and data provided in or alongside fictional illustrations should not be relied upon or given any meaning.
Certain information, including statistical data, third-party data and other factual statements, set forth in the Materials was obtained from publicly available sources prepared by other parties considered to be generally reliable. However, neither Masterworks nor any of its managers, members, officers, employees or agents assumes any responsibility for the accuracy of such information. There is no representation or warranty, express or implied, as to the accuracy, adequateness or completeness of any such information used in the Materials.
Masterworks issuers are limited liability companies that elect to be taxed as partnerships. Each person that holds Masterworks issuer shares will be sent a Form K-1 following the end of each tax year. We do not anticipate that any Masterworks issuer will generate taxable income during any tax year, other than the tax year in which the artwork is sold and only if the artwork is sold at a profit. Title to the artwork owned by the Masterworks issuer will be vested in a wholly owned Cayman Islands subsidiary of the issuer that is taxed as a corporation. We believe this structure will result in zero entity level taxation. The tax consequences to you as an investor will vary depending upon your specific circumstances. You are advised to consult with your tax advisor prior to making an investment.
The Materials are directed solely to persons located within the United States. If the recipient of the Materials lives outside the United States, it is their responsibility to fully observe the laws of any relevant territory or jurisdiction outside the United States in connection with any purchase of membership interests, including obtaining required governmental or other consents or observing any other required legal or other formalities. Unless otherwise indicated in the SEC Materials, Masterworks has not not qualified the offering of the shares in any jurisdiction outside the United States.