Sneakers are big business. New or used, in today’s times sneakers are becoming an investment tool.
In 2021, Sotheby’s auction house sold Kanye West’s Nike Air Yeezy 1 “Prototype” for $1.8 million, making them the most expensive sneakers ever sold at auctions so far. West wore them at the 2008 Grammys. The sneakers were acquired by Rares, a company owned by former NFL player Gerome Sapp.
Sapp’s company lets the average person invest in high-end sneakers as an investment asset. Users of his Rares app can have a piece of the Air Yeezy 1s, for example, for as little as $25.
The Rares platform lets users invest in fractional shares of valuable sneakers.
In the case of the Yeezy sneakers, “We split that sneaker into 72,000 shares and we offer that for $25 a share,” said Sapp. “So, for $25 you have a chance to own a piece of history.”
According to Sapp, Rares can make it easier for people to get into investing for lower amounts of money.
“You don’t have to be an accredited investor to use our platform,” Sapp told Insider. “You don’t have to be a millionaire.” The average income of Rares users is closer to $82,000, he said. “That’s a great thing, because it means a different socioeconomic class is utilizing our platform.”
Rares, said Sapp, is also an avenue for young Black investors. It’s also a way for them to take advantage of a culture they helped create: the sneaker culture.
“The cultures and communities that made the sneaker industry what it is today — that made it popular and valuable — at some point were left out of the secondary appreciation of these sneakers,” he explained. “We’ve created a simple, easy-to-use marketplace that you can go on from a mobile app or the website and literally take advantage of the secondary appreciation of these sneakers.
The area of finance isn’t new territory for this ex-pro athlete. He studied finance at Notre Dame before being drafted by the Baltimore Ravens in 2003. Sapp, who played in the NFL for five seasons before retiring in 2007, since has returned to the business arena — founding several companies, including Rares, which he launched in June 2020.
The launch was a challenge. Sapp faced challenges with getting investors.
“I went out pitching this idea to investors around four years ago, and I was told no 87 times. I thought they were crazy for saying no—that never wavered my confidence in the concept or the industry,” he told HipHopWired.
Here’s how Rares works: The company acquires collectible sneakers, files paperwork to the Securities Exchange Commission and turns them into a tradable item.
“We look for some of the most scarce sneakers in the world,” said Sapp. “Some of our sneakers, they don’t even make any more. Those are the types of sneakers that have a higher chance, percentage-wise, of appreciating. Those are the ones we want to go after because that allows us to give our investors the optimal chance to make money off that investment.”
Rares divides the sneaker’s value into thousands of shares and does an initial public offering on its platform. Rares users then can purchase shares of that sneaker. That share is an asset; if the value of the sneaker rises, so does the value of your shares.
“The way people make money off our platform is when we go to liquidate that sneaker,” explained Sapp.
When Rares decides the asset has peaked in value, it will auction off the sneaker and users get paid out depending on the sale price and the amount of shares they own. Rares typically liquidates sneakers within six to 24 months of acquiring the shoe.
Users, who have to be 18 and older and a resident of the U.S., can also trade their shares to other users on the platform.
“We have about 30,000 users now and of that, we have about 5,000 we call active users that are literally investing in every IPO we drop,” Sapp told Hip-Hop Wired.
Rares does charge an annual management fee and charges a broker-dealer fee of 1 percent on each transaction to cover brokerage costs.
“We want to be the leader in alternative asset investing, not only for sneakers, but for other asset classes as well, like high-end handbags or vintage tees or collectible cards,” he said. “We want to be the Amazon of alternative asset investing. We want to appeal to Gen Z and Millennials and say, ‘You don’t have to only invest in the stock market to make money. You can invest in things that you know about and feel comfortable with.’ “