HONG KONG (Reuters Breakingviews) - A Chinese company is looking beyond trash for treasure. Nasdaq-listed Yulong Eco-Materials, which recycles bricks and concrete, has decided to become an art investor instead. It just acquired Michelangelo’s “Crucifixion” for $75 million after restructuring its business model last month by offloading the waste hauling operation to some of its directors and issuing stock to buy a rare sapphire. It’s a risky form of creative destruction.
Silicon Valley outfits are renowned for changing strategic direction in so-called pivots. Instant-messaging system Slack, for example, started as a video-game venture. The trend has spread as a range of Canadian companies in other lines of business have tried to cash in on the country’s legalisation of cannabis. Cryptocurrency technology also has inspired many unusual attempts at diversification.
The makeover at Yulong Eco-Materials also puts it among a small group trying to bring art ownership to the masses. Artemundi Global Fund and Liquid Rarity Exchange both do something similar. After buying the 61,500-carat Millennium Sapphire from serial Hong Kong entrepreneur Daniel Mckinney for $50 million in stock, it appointed him chairman and renamed the company. A month later, it is issuing more shares to purchase the Italian master’s painting.
Mckinney’s resume, according to documents filed with regulators, includes starting gem-cutting, trade-show, construction and investment banking businesses after he studied chemistry and biology for a couple years at Houston Baptist University. He now reckons he can turn illiquid, hard-to-value assets without any cashflow into an investment. The plan is to take the sapphire on tour, feature it in films and use it in videogames. Maybe there’s some money to be made, but insurance and storage costs are expensive, too. Long holding times are also generally required for art.
Clever attempts at securitisation have been tried – and failed – before in everything from music to sports. Fantex, for example, created a market to buy and sell shares linked to professional athletes, but ultimately shut down. The sapphire deal sent Yulong Eco-Systems shares soaring from about $1.50 to nearly $12 apiece, before they dipped back to $5. The Michelangelo gave them another bounce. Ultimately, though, this business plan could wind up more of an abstract mess than a masterpiece.
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