Synthetic Tracking Securities

Does anyone remember “Tracking stocks” back in the 1990s? (Probably not… they were kind of a dud – everything you want in a publicly traded stock and less)

They were publicly traded stocks that “tracked” lines of business within public companies (the key being that the performance metrics for the business unit was publicly visible).

They didn’t work very well for publicly traded businesses BUT…

Given all of the options for virtual securities, it is certainly possible to build such a system again for almost anything:

Bitclout being the most obvious for tracking people….

But there might be more interesting options.

This article is part of a series on Virtual Securities Business Models.

Art Museum Collections

Many art museums (if not most) have collections that far exceed the number of pieces on display. The Metropolitan Museum of Art in New York has more than 200,000 pieces of art! Many aren’t exhibited for space reasons, but some, such as works on paper, are just hard to display.

Why not synthetic securities for art?

Sell a minority interest in works in your museum’s “back catalog” (probably releasing it gradually) as a funding source and a way to give visibility to (and monetize) your art collection.

Pre-funding start ups for fun and profit?

It seems bizarre that I can speculate on shares in Elon Musk, but I can’t ride along with some of the cool businesses I hear about without being an “accredited investor”. Whether it is something bigger, like ConvertKit, a bit smaller, like Castos or Less Annoying CRM, or even nascent like Legup Benefits.

Anything that can be tracked publicly, can be turned into a security – athletes at FanDuel and DraftKings… though a recent ruling from the IRS should add further confusion to the matter. The IRS allows you to deduct some of your fees, but considers the games “games of chance” and creates some potentially serious tax liabilities for the companies…

Do I need to remind you … I AM NOT A LAWYER?

Questions, Comments, Extensions?

Would you like more information about synthetic securities? Examples of how they are being used? Do you have suggestions on how to improve this article? Other comments? Let me know.

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