Can Speculative Investors Rescue Cash-Strapped Dealers?

Innovative art financing doesn’t always come from where you expect it.

The Scholium trading team from left to right: Simon Southwood, Jasper Allen, Philip Blackwell, Bernard Shapero
Photo via: Art Daily

Dealers looking to purchase significant pieces, but who are short on cash to fund their investment, now have an alternative to moneylenders and understanding peers. Scholium Group plc, a holding company specializing in antiquarian books, has announced the launch of a new subsidiary business, Scholium Trading, to invest in dealers’ acquisitions at the high end of the collectibles market (£100,000–£1 million).

“Access to supportive and knowledgeable capital is often highly problematic for dealers, who typically run very tight cash balances,” commented CEO Philip Blackwell. “They can go to banks, but short-term loans, if available at all, can be costly. Therefore many dealers struggle trading in items in which they have expertise and potential buyers.”

That’s where Scholium Trading comes in. Speaking to artnet News, Scholium Group’s finance director Simon Southwood insisted that the initiative had nothing to do with the traditional loan market. “When a dealer tries to buy something which is out of his reach, we effectively come in and participate with the dealer on that item,” he said. “Basically, we are a competitor to the half-share,” he added, alluding to the traditional model which sees multiple dealers team up to fund an acquisition and share the profit equally.

  A Better Deal Than a Half-Share

The twist here is that, according to Southwood, Scholium Trading offers a better deal than a half-share, as it takes an undisclosed, smaller portion of the profit. It also avoids the unfortunate possibility that one of the partners works more than the other on the deal but both get the same return. “As an organization we are not greedy,” the group’s finance director said, “and we respect that we are very much the silent part of the transaction that goes on.”

Scholium Group plc owns both Shapero Rare Books, in London Mayfair, and South Kensington Books in West London. It was listed on the AIM exchange last spring, raising a reported £8 million. Most of that capital was applied to the company’s stock and trade. According to Alliance News, the group’s aggregate inventory jumped from £4.57 million when it began trading on March 28 to £6.45 million as of July 31. The rest of the funds raised in the floatation have been channeled to Scholium Trading.

Transactions have already begun. Scholium Trading has been providing advances for auctions. It has also been involved in deals with coins and bronze urns. And it has reviewed opportunities in books and sculpture, Southwood told artnet News. While the decorative arts remain Scholium Trading’s natural turf, the company is not averse to investing in fine art, as long as the price tag doesn’t exceed £1 million. “We’re not looking at the multimillion painting field,” CEO Blackwell told the Financial Times’s art market commentator Georgina Adam, “but we think there will be a lot of demand in the mid-price market.”

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