Welcome to the latest edition of Bull Case Bear Case. As always, the goal is to give investors a clear, balanced view of both sides of the coin. Today, we preview the Andy Warhol Marilyn Monroe Print on Rally.

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1967 Andy Warhol Marilyn Monroe Print‍

Rally

5/27 @ 12:00PM ET

Valuation: $170,000

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‍Bull Case

• Record-breaking auction season. The past month has been historic for Andy Warhol. The renowned pop artist opened Marquee Week at Christie’s with a new auction record when ‘Shot Sage Blue Marilyn’ sold for $195 million. The sale fell below its pre-auction estimate of $200 million but kicked-off a barrage of sales that would carry Warhol to his strongest spring auction season ever. This month alone, total Warhol sales have surpassed $332 million with an average sale price of $5.5 million across more than 60 paintings. There have been 17 Warhol’s that have sold for more than $1 million over the last 20 days, and an additional 19 paintings reaching six-figures. In 2022, there have been 18 different sales for paintings from Warhol’s ‘Marilyn’ series. The total sale price has been $203 million with an average of $11.3 million, although the majority is due to the nine-figure Shot Sage Blue. Rally acquired their Marilyn, which is from Warhol’s 1967 series, for $151,308 from Sotheby’s in March (per the "Cash Portion of Asset Cost" in the offering circular). The green, red, and yellow color scheme has only appeared twice at public auction over the last three years, and both prints sold in the neighborhood of $150,000. At a time filled with uncertainty and fears of a recession, prices have remained steady for blue-chip artists and their most recognizable works. 

• Two icons, one painting. While Andy Warhol held his first solo show at the Hugo Gallery in 1952, it was not until he appeared at The Stable Gallery in 1962 that he finally received attention from the major players of the contemporary art world. Less than one month after legendary dealer Leo Castelli sold Warhol’s famous Campbell’s Soup Cans, Marilyn Monroe, who had captured and captivated the hearts and minds of Americans through the mid-20th century, tragically passed away in her Brentwood home. Monroe dominated Hollywood through the 1950s, as her films grossed $200 million, equivalent to $2 billion today. Time Magazine named Monroe one of their ‘Most Influential People of the Century’ and the Smithsonian Magazine included both Monroe and Warhol on their list of the 100 ‘Most Significant Americans of All Time’ in 2014. Apart from Leonardo da Vinci and his depiction of Jesus Christ, there is no combination of painter and subject that is more iconic and recognized than Andy Warhol and Marilyn Monroe. One factor that is unique to the Warhol/Monroe relationship is how their lives inadvertently crossed as they both became cultural icons in the 20th century and have legacies that continue to live on today. 

• One of the original alternative asset classes. Alright, it’s time for a history lesson. Before you start scrolling - likely out of fear that this lesson will bore you - this lesson combines art, investments, and bears, so I promise it is worth reading. Investing in sports cards, video games, and dinosaur bones might be a new concept, but art has more than a century’s worth of history as an asset. In 1904, André Level, a French businessman and collector, curated the first modern art investment fund. The fund included Level and eleven other investors who pooled 212 francs each, or around $7,000 USD today. The novel speculative fund was called La Peau de l’Ours, or “the skin of the bear”. The fund targeted a brand of art that was considered contemporary at the time, but is now recognized as impressionist. Level and company invested in over one hundred paintings, including works by Matisse, Van Gogh, and Picasso. In 1914, on a the precipice of World War I, the collective liquidated their fund at an auction in Paris, and the total reported ROI ranges between 4x-10x, depending on the source. Regardless of the multiple, the fund was a success, and the concept of art as an asset class was born. Today, many investment banks manage collections and funds as a way to not only diversify and capitalize on appreciation, but also as a relationship building tool to connect with an elite class of investors. The art market, which has carried a pretentious and exclusive image, is now being democratized by companies like Rally. There is also strong historical performance that supports the asset class. The All Art Index tracked by Art Market Research is up more than 280% since 2007.

Bear Case

• Has the catalyst passed? When the news broke in late March that Christie’s was set to auction off the Shot Sage Blue Marilyn, the work became a focal point of the contemporary art world’s presence in mainstream news and pop culture. For months, Warhol’s Marilyns have remained squarely in the public consciousness, with widespread speculation as to what kind of ungodly sum the painting could fetch. Well, the wait is over, and the famed work fell short of its $200mm+ estimate, hammering for $170mm and selling for $195mm after buyer’s premium and relevant fees. Now what? The approximate 13% increase from Rally’s purchase price at auction to the offering value of $170,000 somewhat reflects the appreciation that has occurred in 1967 Marilyns since the platform’s mid-March acquisition. For example, a different work from the portfolio of 10 prints (F. & S. II. 23) sold for $283k in January before the auction news broke. In May, two of those prints sold for an average price of $358k, representing appreciation of 26.5%. The more comparably priced F. &. S. II.30 sold for $163,800 in October and $176,400 in April, representing appreciation of 7.7%.  Of course, to be fair, there have been instances of larger upside in the series: the greyscale F. & S. 24 sold for $252,000 in October before another print saw a massive $378,000 sale at Phillips in May (as an aside, it bears noting at this point that Rally’s print is not among the most desirable in the series). Warhol’s market is among the more mature of contemporary artists, and return figures of that magnitude in such a short period of time are not common. For example, performance of the series was more muted from 2018-2020, after the run-up that followed the 2017 Shot Orange Marilyn sale to Ken Griffin. One is left to wonder if, with the catalyst of all catalysts in the rear view mirror, near-to-intermediate term upside scenarios have already transpired. 

• Stagnating high-end Warhol market. Despite headlining this auction season, the Andy Warhol market has not been at its most robust in recent years. While Marilyns from the 1967 portfolio experienced great strength at auction in the wake of the Shot Sage Blue sale, at the high end, Warhols didn’t fare remarkably well. Of course, the Shot Sage Blue Marilyn itself hammered well short of the $200 million estimate, but given the still remarkable sum of money, there perhaps isn’t significant, negative read-through to the Warhol market from that result. At marquee evening events during the month though, there were 10 occasions on which a Warhol work hammered at a ratio to the low estimate below that event’s average, eye-opening since only 13 Warhol works were sold at those events in total. Now, there were a number of breakout sales across those events, which contributed to relatively high average hammer ratios in certain cases. But if you were to average the hammer ratios of the Warhol evening sales, you arrive at a ratio of 1.29x. It's not a catastrophic number by any means, but that is not a figure evocative of tremendous Warhol excitement at the high-end of the market. With those sales being highly visible events with potential to filter down into lower segments, the lack of momentum may not bode well. Still, the momentum in “mid-cap” for this particular season remained quite strong overall. 

• Old asset class, new home. With apologies to VeeFriends and every other NFT project on the platform, this is Rally’s first true foray into contemporary art. That being the case, we have no track record to reference in exploring how a Warhol might hold up on Rally’s secondary market. There are four Andy Warhol works currently trading on Masterworks - just one of those offerings currently has bids at the IPO value, and none have active bids above IPO. However, two of the works, Dollar Sign and - notably - 1 Colored Marilyn (Reversal Series), have seven day weighted average trading prices above IPO levels. Based on that metric, the average trading ROI of the four works at present is 1.5%, buoyed in large part by the 9.2% return of Dollar Sign. All of this being said, the Masterworks secondary market operates differently than Rally’s, and trading is perhaps not a focus of the platform, given a clear focus on time horizons extending 7-10 years in order to best realize returns. It should also be noted that 1 Colored Marilyn on Masterworks was actually appraised downward by 13.2% at the close of the first quarter. 52 Masterworks offerings were appraised on 3/31, and of those 52, just 16 (~30%) were appraised to lower values than the offering amount. The downward movement for 1 Colored Marilyn was the largest by some margin - no other work saw a negative gross change larger than 3%. Following this quarter’s events though, we’ll be watching with great intrigue for the next appraisal.

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Terms Defined & Further Information

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Hammer Ratio: A measure of a work’s performance at auction that divides the hammer price (before any buyer’s premiums and fees) by the low estimate. The hammer price, rather than the ultimate price realized, is typically used because estimates are not inclusive of buyer’s premiums and fees.

Hammer Price: The price offered as the winning bid in an auction, before buyer’s premium and relevant fees are added.

F. & S.: Refers to Frayda Feldman & Jord Schellmann, who compiled the catalogue raisonné of Andy Warhol prints. The 1967 Marilyn prints, then, are referenced by their appearance in Feldman & Schellmann’s work. The Rally print is “F. & S. II.25”. The ten 1967 Marilyn prints range from F. & S. II. 22-31. One note on the prints: much like a print run of 250 sports cards, they should not be viewed or treated fungibly, particularly after 55 years. Different examples can show varying degrees of fading or scuffing, and condition of the verso and the signature may also vary.

Catalogue Raisonné: A comprehensive compilation of all known works by an artist, sometimes in a specific medium, often utilized as a resource in the determination of provenance and authenticity. 

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