Inside the Fractional Library: Breaking Down the Investable Book Market
Largely Inconsequential Billions spoilers ahead: when Chuck Rhoades is in desperate need of cash in a hurry, what does he reluctantly sell? Not sports cards. Not comic books. Certainly not video games. No, the esteemed Chuck Rhoades parts with his Winston Churchill Second World War collection (for $40,000). And how does the unimaginably wealthy Bobby Axelrod stick a petty thorn in Chuck’s side? By not only buying the collection but cornering the entire first edition Churchill market!
Of course, Billions is a work of fiction, but be that as it may, there’s a reason that the wealthy and sophisticated hold these assets so dearly. And in 2021, fractional investors hold them dearly as well, in fact, perhaps even more dearly than those with the deepest pockets.
Books have performed remarkably well in the fractional world to date, with an average since inception ROI of 50% and an average 2021 ROI of 21%. Those numbers place books up there amongst the best-performing asset classes (third), despite garnering essentially none of the mainstream buzz and buyout activity commanded by comic books and video games. The fractional performance also defies an appreciation trajectory that, for many fine books, is not particularly steep. Indeed, we’ve found that the track records for many of the most collectible, fine books is one of slow, bond-like appreciation, but often with short-term volatility due to the nuances of varying sales.
Okay, so maybe books are a bit sleepier than some of the “cooler” assets on offer fractionally, but they are no less replete with historical significance, long-term appeal, and overall collectability. And perhaps, rather than being overly hasty, fractional investors are attuned to greater potential for these assets than has been evidenced in the past. Perhaps, books have been previously hamstrung by a somewhat stagnant audience and a limited pool of the same dollars. But with alternative assets more broadly gaining acceptance among a younger generation of investors and collectors, it would surprise few if a journey that started with comic books and video games led those newcomers to the inspiration, the OGs. It seems fractional investors are banking on it, and they are among the first entrants of that expanding audience.
Whether this is starting to happen in earnest at auction is to date unclear, and I don’t mean to undersell the existing demand – which can certainly be robust. However that demand is constituted today, its strength was evidenced by the sale of the illustrious collection of Theodore Baum. That collection, a veritable first edition library amassed over the course of decades, just brought in nearly $10 million at auction with Christies.
The precise number was $9,657,375. All from books. 400 of them to be exact. That’s an average price of $24,143 per book.
Baum carefully and diligently assembled the collection, working with dealers and auction houses to source the finest copies of the most renowned books. Just about any truly acclaimed author you can think of and their most celebrated works – all represented in Baum’s collection. Consequently, there’s tremendous overlap with the fractional investor’s library, which itself has become exceedingly formidable.
In the course of discussing the results from the Baum collection auction, let’s learn a bit about the fractional book portfolio, the book market more broadly, and how to appropriately compare sales. First editions, first prints, first states. Association copies, inscriptions. Restoration. It’s a lot to unpack, and the learning curve can seem steep, but we’ll start to demystify it all as we go.
Like memorabilia, there is a tremendous amount of nuance to assessing the value of a book, and that process is not made easier by a standardized grading system. Value can vary dramatically based on the edition, print, and state of a book, the nature and quantity of issue points therein, inscriptions, and of course condition. These are but a few variables, and you’ll notice that while some are objective and factual, others are quite subjective or murky. All of this is to say that building a book collection is relatively simple – buy what you like – but building a book portfolio requires careful study, and that knowledge is often accrued over many years and decades. But hey, we can’t start any sooner than today – right now.
Step into the fractional investor’s library. I can assure you it smells of the finest literature and the richest mahogany.
First, a few of those key definitions to frame our understanding.
First Edition: A copy of a book that has been printed using the original, first setting of type. When a book is first published, all copies that have been printed without major changes to the copy may be considered first edition.
First Print: A copy of a book that has come from the first print run of the edition. For instance, the first edition of a book may have had 1000 copies printed initially. Once those have sold and if there were no major changes to the copy, a second print run may be initiated.
First State: Occasionally, books from the same edition and print run may differ, often due to errors that have been made in the text itself, or on the binding or book jacket. These errors are corrected in the course of printing and the pre-correction version is deemed First State. It is sometimes used synonymously with first issue.
Issue Points: Errors or corrections that identify a copy with a certain state or issue. Experts will look for these issue points, and they are often listed along with their page number or location in auction descriptions.
Inscription: I include this only to distinguish it from a signature, as some may believe them to be synonymous. An inscription is a written note, by the author or somebody else, to the recipient of the book. A “signed” book is just that – simply signed by the author – an autograph. Inscriptions are typically considered more valuable due to their more personal nature, with the author lending a more genuine touch, which also proves less prone to forgery. However, signatures can be quite valuable in their own right, particularly depending upon the infrequency with which the author signed – there are single digit, verified copies of ole Billy Shakespeare’s signature.
Association Copy: An association copy is a copy of the book associated with the author, the work, or the contents of the work. This can often mean it’s the author’s copy of the book or it’s a copy gifted directly by the author to someone closely connected to them or the work, often with an inscription. Association copies in the right edition, print, and state may be considered the pinnacle of collecting.
Very Fine/As New: A book in the same pristine condition as when it was first bound. Very rare to see an older book described this way.
Fine: A book in near perfect condition, though the definition varies based on age. An older book may show more wear around the edges or even a slight tear in the dust jacket and still be considered fine.
Near Fine: A book with minor defects – essentially this designation suggests the book is in excellent shape but falls short of being identified as “fine”.
Very Good: A book that may show signs of both shelfwear and gentle reading. The dust jacket may be chipped, rubbed, or missing small pieces, but should generally be both bright in color and clean. The book should similarly be tight and clean.
The Time Machine
H.G. Wells, 1895
Rally: $46,500 (inscribed)
At first glance, that’s quite the valuation discrepancy for two first edition, first state copies. Alas, the copy belonging to fractional investors is inscribed by Wells, and those do not surface for auction often. Heritage last sold an inscribed copy in lesser condition and in a slightly later print in 2013 for $10,000. Christie’s sold inscribed copies in 2008 and in 2005 for 15,000 GBP and $12,000 respectively. First edition, first issue copies without an inscription sold in $2,000-$4,000 range in the early to mid-2010s. Given the condition of the Rally copy, the inscription, and its early issuance, fractional investors have themselves a blue-chip Wells asset, among the best available – the question is how they will grapple with the valuation given the dearth of data points. The book has fully funded but not yet traded.
The Wonderful Wizard of Oz
Frank Baum, 1900
Both copies are of the first edition and first issue, and both are in the second state or variant B binding, which features the publisher’s imprint on the spine in red, sans-serif typeface. Variant A featured green type and is thought to be a trial version. The Rally copy is in notably better condition than the one from the Baum collection. A copy comparable in condition to the Baum version sold at Heritage last December for $81,250, so this is a comparably softer result – perhaps owing to the incredible assortment of other assets available for sale.
Condition is particularly important for this book and confirming the state is of additional importance, as there are several copies that are of a “mixed” state, with one issue point suggesting first state and another a later state. The copies may otherwise appear the same, but the absence of key issue points may mean a difference in tens of thousands of dollars.
For further context on inscriptions and associations: an inscribed, association copy of this book brought in over $150,000…twenty years ago.
Adventures of Huckleberry Finn
Mark Twain, 1885
Huck Finn is an interesting case where true, specific states of the book do not really exist – rather, the issue points are so many and so mixed that books are often simply referred to as “early” or “earlier” state based on the points contained. In fact, the Christie’s listing notes that an expert has not seen a copy with all the first state issue points. We do know that both the Christie’s book and the Rally book are from the first edition with the original green pictorial cloth. We do not, however, have details on Rally’s issue points, while the Baum collection book has many first state points, as well as some third and fourth state points.
Sotheby’s last sold a comparable book for $18,900 in December of 2020, though not all of the issue points are the same. Historical sales of comparable copies have oscillated considerably by thousands of dollars – due in part to small differences in state and condition – but the trajectory has largely been upwards. Again, though, there’s incredible volatility of results.
The Rally copy was launched and funded in April for $22,000.
Henry David Thoreau, 1854
Both the Christie’s and Rally copies come from the First Edition and First Print of Walden, of which there were only 2,000 copies. These copies feature original brown cloth and ads from May of 1854 – you know, before companies just bought podcast ad reads: If you’re like me, you hate being in solitude in nature in uncomfortable underwear; use promo code WALDEN for 15% off your next order of MeUndies.
There is a difference in condition, which brings us to another nuance of the book world. Books receive an unofficial “grade” of sorts when they come to auction or are sold through dealers. The book from the Baum collection is merely “fine”, while the Rally copy is “very fine”. While these broad, vague, and highly subjective ratings are typically reasonable, take them with a grain of salt and judge with your own eyes.
Copies of similar condition routinely garnered sale price sin the $10,000-$15,000 range throughout the 2010s, but particularly in the later stages. It should be noted that Christie’s was able to sell three copies during that decade for north of $20,000, including a 2014 sale for $27,500.
A Tale of Two Cities
Charles Dickens, 1859
Christie’s (second issue): $6,875
Rally (first issue): $28,000
I list this sale only to highlight the difference in values that can arise from first vs. second issue. Rally’s copy, in the first state, is in excellent, near-fine condition – the key issue point identifying the copy as first state is the misnumbering of page 213 as “113”. The Christie’s book has this page number correct. Now, while the valuation gap between Rally’s copy, which launched in November 2019 and is up 93% since, and the Christie’s result is enormous at about 4x, it is unclear whether the Rally copy would actually fetch $28k at auction. There have not been recent comps, particularly in the green binding, supporting levels higher than the low $10,000 range.
The Origin of Species
Charles Darwin, 1859
Rally: $300,000 (not yet launched)
We don’t have the full specs on the Rally book just yet, as it’s yet to be launched and the date of IPO has not been announced. However, we do know that both books are from the first edition run of 1,250 copies. Rally’s copy is said to be in Very Good condition and does not appear dissimilar from the Baum collection book.
This is the second strong result for this book in recent months, as Christie’s also sold a copy back in July for 325,000 GBP or $445k. Before then, it was more common to see copies of this book without special provenance or accompanying signed letters selling for $150-250k.
The Fourth Folio
William Shakespeare, 1685
Pretty incredible to have comps for a book from the late 1600s. Both the Christie’s and Rally copies are from the presumed first issue of the Fourth Folio. The issues differ only in the title page, and both copies do not have Chiswell’s name added under “Printed for” at the bottom of the page. The timing of the issues is of some dispute, however, with certain experts claiming they were printed the same day.
The Rally copy launched in July of 2020 at a valuation of$115,000 and is down 12% since. Comps were previously more closely gathered in the $75-$90k range. The Christie’s result falls neatly in the estimate range of$100,000 - $150,000.
To invest, or not to invest, that is the question. I've nauseated myself with that cliché, let's move on.
The Great Gatsby
F. Scott Fitzgerald, 1925
Christie’s: $93,750 (first state)
Rally: $135,800 (inscribed, second state)
Gatsby is one of the few books on Rally to be down since IPO, with Fitzgerald’s masterpiece dropping 32% from its September 2020 IPO level of $200,000. The Christie’s result does not necessarily bring welcome news, as the Baum book is first edition, first print, first state, while the Rally copy is first edition, first print, second state. The state difference relates to the dust jacket: the first state dust jacket has a lowercase “j” in “jay Gatsby” hand-corrected to a capital J in ink on the rear panel. The second state has the correct capitalization.
Importantly though, the Rally copy is inscribed by Fitzgerald to Henry Tatnall Brown, a banker and book collector. The book sold at Heritage in 2018 for $162,500, a level the Rally book is now about 16% below. Inscribed copies have not come to auction frequently, with none since that sale.
The Christie’s result is not particularly strong for a first edition, first print, first state. Their previous sales of such copies, many years ago, crossed six figures with ease at $134,500 and $163,500. Sotheby’s has had similar results, even reaching $377k on a particularly fine copy in 2014. That’s not to say the Baum result is among the lowest attained – it’s just certainly not close to being among the highest.
A Boy’s Will
Robert Frost, 1913
Essentially Frost’s rookie card – Twilight was published first but scarcely printed. Both the Baum collection copy and the Rally copy are in incredibly rare company, as there were only 350 copies issued by the publisher, Nutt, before it went into bankruptcy. Both copies feature the A binding – there were A and B bindings among those 350 copies.
This book was among Rally’s earlier non-car offerings, offered in November 2019 at $13,500. Since then, it’s up about 13%. Sales of the book don’t happen particularly often, and the first issue is considerably less frequent. Sotheby’s sold a copy in 2011 for $7,500 and Swann sold one in 2016 for $3,500, which was below their estimate of $5,000 - $7,000. The Baum collection sale similarly fell below its estimate of $5,000 - $8,000.
Allen Ginsberg, 1956
Rally: $15,500 (inscribed)
Rally’s copy is the first edition, of which 100 copies exist, and it appears Christie’s is of the same edition, particularly considering its association. Though the Baum book is an association copy –belonging to the co-owners of the venue for Ginsberg’s first, full reading of Howl – it is not signed or inscribed. Rally’s copy, on the other hand, is a presentation copy inscribed by Ginsberg to Michael Rumaker, who would publish one of the first reviews.
An inscribed, presentation copy of the first edition is held in quite high esteem. A signed, but not inscribed review copy of the first edition has sold at Swann for $5,760, but that was way back in 2011. Rally doesn’t list any comps beyond 2006 (the highest is $7,475) and given the criteria for a somewhat like-for-like comp, that makes some sense. Investors would of course have to decide if an inscribed presentation copy is worth almost 4x an unsigned association copy or if appreciation over the last decade warrants the current valuation.
The Baum book handily exceeded its estimate of $800 - $1,200.
Frank Herbert, 1965
Rally: $31,500 (inscribed)
Wow, alright Chalamet and Zendaya bulls….I see you. The Christie’s sale was about 6x its estimate of $2,000 - $3,000. The Rally copy launched in December of 2020 at $13,250 and is since up 138%, gaining 57.5% in its last window in June.
The Christie’s copy is merely a first edition, first printing version of Dune, while Rally’s is not only first edition, first print, but also inscribed by Herbert – somewhat of a rarity. Heritage has handled the largest volume of Dune auction sales over the last decade, and five figure sales have really only been reserved for signed or association copies. The highest such sale was for $15,000 back in 2018 for a signed copy.
The huge appreciation since IPO for the Rally copy means prospective and existing investors will have to consider whether the Dune franchise truly can take its place alongside others that it inspired (cough, Star Wars) in the cultural and social consciousness, and if it does, what it means for such a prized copy of the book. The conclusion may be that such an outcome is already priced in.
On the Road
Jack Kerouac, 1957
Rally: $58,065 (inscribed)
Rally’s copy traded this week and was up 68% (!). However, prior to that, it was the worst performing book on the marketplace, and it remains well below its December 2020 IPO value of $98,000. If you’re wondering about the huge valuation discrepancy, and you guessed that inscription was the reason, you are correct. Kerouac inscribed the Rally copy to neighbors of fellow author and friend, Lucien Carr.
The result for the unsigned first edition at Christie’s is a fairly strong one, exceeding the $3,000 - $5,000 estimate and also exceeding a number of recent sales for similar copies which do fall into that estimate range. That indicates there may be some strength in the market for the title.
In terms of inscribed & signed copies, Rally notes a July sale from Sotheby’s for $81,900. Unfortunately, this sale doesn’t appear on the Sotheby’s website, so we’re unable to compare the details. Sotheby’s did, however, sell an inscribed, association copy in 2018 for $52,500, which offers some confirmation that demand is existent at the high values associated with those esteemed copies, and perhaps validates the recent move upwards in trading.
Gone with the Wind
Margaret Mitchell, 1936
Rally: $25,000 (inscribed)
Sensing a pattern here? We’ve had the opportunity to look at several unsigned sales versus inscribed or signed Rally copies, and the multiples – On the Road aside – have shown some consistency. Yet again, we’re looking here at a Christie’s sale of an unsigned first edition, first print, first issue. The result exceeded the top end of the estimate range, which was $8,000, and is a fairly strong outcome for an unsigned first edition, first issue which has more typically commanded prices in the mid to high thousands in recent years.
But enough about the Christie’s copy, because the Rally version is a special case. Not just because its inscribed (though that is special– Mitchell stopped doing so after 1940), but because we have repeat sales data! It’s somewhat of a rarity in the book world to see a repeat sale of the same exact copy but that’s what we have here – the book on Rally sold twice with Heritage: once in 2008 for $17,925 and once in June of 2021 for $21,250. Running the numbers, that’s an 18.5% return which…isn’t bad until you consider it was attained over a 13 year hold; that’s a little over 1% annually. But that’s kind of the reality for many books – it may not always be this muted, but books can be sleepy and bond-like in terms of return.
The Rally copy was offered at an initial value of $25,000 and has yet to trade. That already puts it 17.6% above the June 2021 sale.
George Orwell, 1945
We have here a like-for-like comparison, at least to the extent that’s possible for books. Both copies are from the first edition with the first issue green cloth dust jacket. There were just 4,500 such copies. Rally launched their copy in November of 2020 at an initial offering market cap of $10,000. Since then, it’s up a mere 180%, though Rally does not list a more recent comp than March 2020 which was a sale of just over $6k. So, the Baum sale, which absolutely battered the estimate range of $3,000 - $5,000, comes as welcome news. Most sales of this edition in the 2010s did linger in that mid-thousands range. Fractional shareholders may be skeptical of such a large run-up absent corresponding comparable sales.
Catcher in the Rye
J.D. Salinger, 1951
We again benefit from a sale very much comparable to the copy trading fractionally. Both copies of Catcher are of the first edition with the first issue dust jacket, featuring Lotte Jacobi’s photo of Salinger on the back. This is yet another result that hammered the estimate range, which was $4,000- $6,000 – though based on previous sales, that was quite conservative. Swann sold a superlative copy – truly it looks almost brand new for a 70 year old book – for $35,000 in February of 2020. Heritage sold a copy in similar condition to the Christie’s copy back in March of 2018 for $11,875, so this result still shows strong appreciation for the title. In terms of condition, the Rally version probably falls between the Swann example and the Christie’s sale, though closer to the latter than the former.
Catcher IPO’d at $12,500 in June of 2020 and has doubled in value since.
The Grapes of Wrath
John Steinbeck, 1939
Rally: $38,900 (inscribed)
Let’s start by noting that the Rally copy is a particularly special one – a first edition inscribed to Steinbeck’s sister, Beth. It doesn’t get much more personal than that. It was initially offered in December of 2020 at $39,000 and is down a mere $100 since. Luckily for us, we have record of another sale for this exact copy – back in 2007, it sold for $47,800 at Bonham’s. Today, in a world where the stock market is broadly about three times higher than it was back in ’07, that book trades for less than it sold for in ’07. A lesser association copy sold for $18,750 back in 2013, and a signed copy garnered $15,600 that same year.
As for the unsigned version sold at Christie’s, it’s another really strong result. For example, another first edition, first issue copy in near fine condition just sold in June at Heritage for $3,500, which explains the Christie’s $2,000 - $4,000 estimate.
The Lord of the Rings Trilogy
Both the Christie’s and Rally versions of the trilogy feature first edition first state copies of The Fellowship of the Ring and The Two Towers, while The Return of the King is second state for both. That second state is identified by a few key decision points: namely, a signature “4” mark on page 49 and lines of type sagging in the middle. The Christie’s result is a mild decline from a similar trilogy sale at Heritage in June for $47,500.
The Rally trilogy was initially offered at a market cap of $29,000 back in June of 2020 and is up 124% since, with a 30% increase in its last trading window.
Alice in Wonderland
Lewis Carroll, 1866
To put it mildly, understanding the timeline of editions and issues for Alice is a challenge. Here’s what went down. The illustrator, John Tenniel, was displeased with the quality of printing for the first edition first print from London publisher MacMillan, and those copies (nearly 2,000) were recalled as a result. Carroll absorbed the cost of recalling those copies, and to cut his losses, they were sold to American publisher D. Appleton, which would publish 1000 copies. This is considered the first American edition, second issue. That is the type of copy trading on Rally, where it is up 100% from its September 2020 IPO at $12,000.
Okay, now the Christie’s copy from the Baum collection is the first issue of the second MacMillan edition, meaning the one published that was palatable to Tenniel. This may be considered the first published edition by some, though a dozen copies are believed to remain from that true, first print. The example at Christie’s is in truly remarkable condition, which explains how it sold for almost 10x the sale of a copy from the same edition at Heritage in October of 2020.
We were unable to unearth another sale of the first American edition since the 2016 comp Rally lists, which was $10,600. It was interesting, though, to find a 1999 sale at Christie’s for a book of the same edition in very good condition which sold for $34,500. Six months earlier, in 1998, the exact copy of the second edition sold at Christie’s recently sold for $25,300 (annualized appreciation of 2.4% to today). This gives some sense of how the two editions may be valued versus one another.
As a side note, the 1998 buyer of the second MacMillan edition sold it at a very narrow gain in 2005 for 15,600 GBP, which would’ve converted to $26,821 at the time. With last week’s sale, that buyer would’ve realized a 63% return, or 3.1% annualized.
I started to put together a list of other results that caught our eye or struck us as strong candidates for fractionalization, and the reality was that it was pretty much...all of them? Seriously, the lot composition of this auction was insane, and if you’re at all fascinated by literature, both parts are worth a look (linked below). A few of my notables: The Wealth of Nations ($200,000), The Raven ($275,000), The Sun Also Rises (Hemingway Rookie Card - $87,500), Moby Dick ($81,250), and The Natural (time for Collectable to get in the book game? $12,500).
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