Sneakers are starting to look less and less like, well, sneakers. The blossoming of the secondary market around rare and collectible footwear in the 2010s has stripped certain shoes of their original function, making them more enticing as items you put in your portfolio than items you put on your feet. The top tier of hype sneakers are now regularly pitched as legitimate investments (it’s no coincidence that resell powerhouse StockX has billed itself as “the stock market of things”) and collectible art.
Auction houses have seized the moment, battling back and forth to set new records for high prices on sneaker sales. The latest victory came last week, when Sotheby’s sold a one-off pair of Nike Air Yeezy samples worn by Kanye West at the 2008 Grammys for $1.8 million. The sale set a new bar for the highest publicly recorded price for a pair of sneakers.
The Yeezys were purchased by Rares, another entity seeking to reshape sneakers into financial assets. The Las Vegas-based company, co-founded by former NFL safety Gerome Sapp, wants to sell fractional shares of high-value shoes like the Grammy sample Yeezys.
“These are real securities,” says Sapp, who is also the CEO at Rares. “For some people, this may be their first investment, their first real SEC-qualified investment.”
The platform plans to sell shares in the Yeezys through an initial public offering on June 16. (Before that, on May 13, it will do the same with a sample pair of Jay-Z x Nike Air Force 1s.) Users on the Rares app will be able to invest in the sneaker as they would a company listed on a stock exchange. If Rares can eventually liquidate the shoe at a higher price than the $1.8 million it paid, individual owners of shares in the Yeezys will profit accordingly.
Sapp, who was a finance major at Notre Dame and got an MBA at Harvard Business in between his seasons playing professional football, believes his company can offer more than just capital gains through shoes. He sees Rares as a tool that also creates access, giving people who can’t afford a pair of million-dollar Yeezys a way to still participate in them. For him, it’s about democratizing this new type of investment.
“I grew up in Houston, Texas, in the Fifth Ward, so I know intimately what a lack of access and opportunity looks like,” he says. “So for me, it’s all about giving that access and opportunity to the cultures that made this industry hot, that made it valuable.”
The day after Rares spent nearly $2 million on the historic pair of Air Yeezys last week, Sapp spoke with Complex about his company’s plans for the shoes and ambition around turning them into something more than just footwear. The conversation, lightly edited for clarity and length, appears below.
When did you decide you wanted to buy the shoe?
That’s a great question, man. Probably two weeks ago, like a week and a half, two weeks [before the sale]. I knew the shoe was up for private sale and I’d called Sotheby’s and inquired about it. It was one of those things where I called my team and they thought I was crazy kind of. But for me it was like, man, this shoe means everything to me for a lot of reasons. 2008, you know, that was my last year playing in the NFL.
I remember that concert. I remember that Grammys that he performed at. And, for me, I was leaving one career. I was unsure about what was next in life and I remember him performing, and those shoes dropped, and I was a big sneakerhead and those shoes kind of broke the mold for everything.
And it was kind of this new beginning of, man, this isn’t the end, you got so much ahead of you. And I remember that feeling watching that Grammys and then obviously becoming more and more a fan of the sneaker world, the sneaker community. Obviously over the years that sneaker has become, for me, my grail.
So it was one of those things. It was like, man, I think I’m going to make a bid on this shoe. My team was like, “Man, you know, we’re still a startup,” and I was like, “Well, we got to step out and be ourselves and go for what we want.” And this grail represents us right now. We’re stepping out into a new abyss and why not do it with a bang-type thing? So I ended up saying, “Hey, call Sotheby’s. Hey, I want to bid on this shoe.” So obviously there was other bids on it. We went back and forth and essentially ended up winning that bid.
Did you see the shoe first or anything? Did you get to physically see it? Because it’s so much money to put down for an item.
No, but, obviously, within the negotiations I knew the shoe was in good condition, or at least the condition it needed to be in to warrant what we were going to pay for. Plus in the collectible space, the sneaker collectible space condition obviously means a lot, but it’s more of what that shoe is, who wore it, and when they wore it.
So, I knew there was a certain level of, OK, this shoe is in good condition or good enough condition. But, to answer your question, Brendan, no, it was in Hong Kong and it still is in Hong Kong, I believe, being showcased in a kind of a traveling museum for Sotheby’s pieces.
When do you get the shoe?
I should get the shoe in, I believe, two weeks. I’m actually waiting for Sotheby’s to let me know when that shoe gets back to New York. The last we talked they said it’d be roughly a week or two after [the sale].
Then when it gets to New York, what’s the plan? Is it going to be on display somewhere? Is it going to be under lock and key somewhere?
You know, we’re still figuring that out but I’ll give you a few scenarios of what we talked about. The big thing about acquiring that shoe is really bringing it down to the cultures and the communities. When I say that, that I come from that culture and community, I grew up in the ‘80s, and we were the generation that first started hyping up sneakers. So, for me, this was that opportunity.
So in taking advantage of that opportunity, we’ve talked about possibly bringing that shoe to Chicago and showcasing that. Obviously it’s got to be a lot of security around, but we talked about taking that shoe kind of on a cultural tour around the US and in different markets where the culture of sneakers have been very prevalent.
And one of those, obviously Chicago where Kanye is from all the way down to, back to Vegas where I’m at right now. So we haven’t finalized that but there’s a chance we take that shoe on tour across the US and certain cities.
You mentioned kind of going back and forth on the price of the sneaker. How did you know that the price was fair? Because, sometimes I see these gigantic prices from auction houses and I feel like they’re just made up to an extent.
It really came down to: Let me think about this from an art standpoint. If this was a piece of art, would people question it? I’m not saying you’re questioning it, but I had to step out of myself and out of kind of my everyday norm and say, OK, this is not just a sneaker.
This is a piece of art. This is an iconic piece of sneaker-world history and what we pay for it is really a derivative of what we believe it’s worth, just like an artwork-type thing. So, for me, it was just a function of, OK, well, obviously if we pay this price it’s going to set world records. And we’re not here to set world records—if I could have gotten the shoe for 50 grand, shit, I would’ve gotten the shoe for 50 grand. You know what I’m saying? Believe me, I tried.
But it really came down to, OK, all the other things considered, this comp, that comp, where we think we’re going to be able to take this shoe with storytelling—because that’s the cool thing about Rares. We haven’t technically launched yet but every time we drop an asset, i.e. a sneaker, we’re going to make documentaries around it to tell the cultural story and cultural significance around that sneaker.
So to answer your question, the price we landed on is way below where they wanted it, just so you know that. And it was a price point that we felt comfortable, I felt comfortable with, in terms of, this properly represents not only where that shoe is now from a financial standpoint, but where we think that shoe’s value will go in the next year or so.
And, then was there a lot of back and forth on that?
It was a lot of back and forth, just like any other negotiation. But I just want to tip my hat to Sotheby’s for being reasonable, being very reasonable. And like I said, I tried to get the thing for 50 grand, but it is what it is.
I was glad we were able to have open dialogue and whatever the price we settled on was what we settled on. And like I said, it meant so much to me personally, but obviously you don’t make big purchases like that just for a personal thing.
You know, I’m not going to wear the shoe. So I had to look at it from a cultural or community standpoint. Kanye meant a lot, still does to a lot of people, depending on what—a lot of people have opinions about him. But what he’s done for music and the sneaker industry, put everything aside, has been colossal. And that sneaker really did set the tone for that. So based on what Rares believes in terms of sneaker culture and really allowing people to now invest in the culture of sneakers. This definitely was a catalyst shoe that we felt that we wanted to start with.
What does that investment look like? I know you said Rares isn’t launched just yet, but when it does launch, what can people do to own a piece of the shoe?
Great question. So what they can do is first download the app or come to the website, it’s Rares.io, and essentially we open it up for IPO, which means we’ve divided that shoe up into shares, thousands of shares. So based on the number of shares you want to purchase in that shoe, I believe those shares will be anywhere from $15 to $25 a share, somewhere in that range, give or take.
You just purchase the shares, just like you would purchase shares in a company. When all the shares of that IPO are purchased, meaning there’s no more shares available for that sneaker, we close the IPO. And also, an important point: we’re going to IPO that shoe for what we paid for it, too. So it’ll be an IPO for $1.8 million.
We’re not making a premium off of it. So once that IPO closes or, as I just mentioned, all the shares are purchased, it will then go into secondary trading where if, Brendan, you missed the IPO, you weren’t able to get in and buy shares in the IPO period, you can come in the secondary period and trade with somebody. Or buy someone else’s shares and they can sell you their shares, just like any other traditional security.
So is the idea that people will want to own a piece of this strictly for investment or do you believe that people also want to own a piece of this to have some small part in this iconic shoe?
I believe it’s both, Brendan. I believe it’s both, you know, if you want to go back to that whole sneakerhead adage of “buy one to rock, then, you know, buy one to stock,” it’s the same thing. But when we talk about stock now we’re actually talking about a real security. So for some people it literally is, “I just want to invest in it. I know she was going to continue, or I have a pretty good understanding of the belief that this shoe will rise in value.”
All these sneakers at some point rise in value. So there’s going to be a group of people that just want to take advantage of that, an arbitrage situation. Well, there’s other people like, “You know what, this is a part of sneaker history. This is a part of cultural, kind of, entertainment history.” So why not buy a share in this shoe for $15, $25 and you know, why not see how it goes? So I think you’ll see a convergence of those two mindsets really coming together and participate in this sneaker’s IPO.
Are you worried that this places too much emphasis on the financial aspect or turning a sneaker into an investment? There’s been a lot of blowback from people. I think specifically about a Bloomberg Businessweek article that labeled sneakers an asset class. There’s a lot of people who don’t want sneakers to turn into strictly investments.
Well, that’s the thing, man. There’s a lot of sneaker purists out there, and I come from that generation, too. I have uncles that are that way, and we debate all the time. So I understand the thinking on that. I’m never going to disagree with them, because they have their beliefs and they have them for a reason.
But when you think about it, all the work and attention that’s been paid into this sneaker culture, from back in the late ‘70s and the ‘80s and all the athletes and the celebrities that had their hand in collabs, it’s inevitable that this sneaker, this once underground urban-type thing, which still is to a certain degree, would turn into its own asset class. And that’s just the progression of the way things work in financial instruments.
You know, my thing is if someone really wants to purchase the shoe, they can buy it at the end if they want to. If they really want to buy the shoe and own the shoe. But if they can’t, which most people can’t, and that’s the thing, most people couldn’t buy this shoe and then basically that creates a lack of access. So now we’re giving people access to it in a different way where otherwise they wouldn’t have that access to own a piece of it. And even if that piece is strictly financial, that’s their chance to own a piece of that sneaker history.
So in terms of what do I think, or the sneaker industry not really feeling the idea of just looking at sneakers as a financial instrument, I’m not going to disagree with them. As I mentioned, everyone has their feelings on that. It’s a $2 billion industry a year. People just flipping shoes for money. It was $2 billion worth of people already doing that and that $2 billion is actually projected to grow to around $30 billion in less than a decade. So we’re just making it easier for them to do that.
I see Rares as doing that but sometimes it feels like when companies like Sotheby’s or Christie’s are involved, you bring in these institutions that have not historically participated in sneakers, and I wonder if we’re losing grasp of this thing, do you know what I mean?
That’s a good point and the one thing that I’m always conscious of and I was very conscious of, is that perception that we’re just a pawn of a bigger player, a useful fool, so to speak. And you know, the biggest thing about what we’re doing is, listen, we acquired that shoe. It wasn’t given to us, like, we paid the money.
We bought that shoe, and the reason we bought that shoe is because if we didn’t buy that shoe, that shoe would be in some stuffy museum right now, collecting dust behind glass. And for us, it’s like, no, take that shoe down to the culture, the culture that I came from. I grew up in Houston, Texas, in the Fifth Ward, so I know intimately what a lack of access and opportunity looks like.
So for me, it’s all about giving that access and opportunity to the cultures that made this industry hot, that made it valuable. So, Sotheby’s was a means to an end. They were a great partner. I’m glad we were able to make that deal but we acquired it and then now they’re out the picture. So for us at this point, it’s our responsibility now to educate people on investing, which we will. We’re not just going to say, “Hey, come in here and make it.” You know, it’s like, “No, no, no, here’s what an IPO means. Here’s what fractional ownership means.” Here’s how you can be a better investor.
Here’s what the stock market is so you know what this is mimicking. So part of what we’re doing is also educating the culture on how to be better investors and how to be investors with sneakers. So inevitably we can all win in the end and they can do well on our platform.
So we’re not taking advantage of—we’re not these culture vultures, promise you. We’re here to essentially provide that access that they wouldn’t have otherwise gotten and even if that’s just through fractional ownership and through a financial means, then they wouldn’t have gotten that otherwise. So we wanted to be the one to give it to them while we educate them on why that’s important, too.
And then, what can happen to the shoe from here? So Rares owns it now, but people can buy fractions of it. Is there a situation in which Rares sells the shoe or what happens to the shoe next in this process?
So after the IPO period, which we talked about, when that closes and secondary trading occurs—and also, too, we’ve already had people make offers to buy the shoe from us.
For more than $1.8 million?
For more than $1.8 million. But like I said, it’s not a pure financial thing for us. We want to make sure people have a chance to buy it and own it and trade the shares in it and own a piece of this, even if it’s a financial piece of it. So at a certain point we’ll figure out our team and I, and our advisers, we’ll figure out what makes the most sense in terms of when we liquidate this asset. And what would make the most sense for the investors who are invested in it in terms of their financial investment.
So at a certain point, we will liquidate the asset and hopefully at that point, people will make more than what they bought into it. I mean, that’s the goal but there’s a chance we may lose money. Obviously because we as a company, because we’re IPO’ing at the same price we purchased it for. Obviously we feel like this sneaker is going to do well in terms of appreciation.
And like I mentioned, we’ve already had offers on this sneaker but like I said, the goal is to give access and opportunity to those communities and cultures that wouldn’t otherwise have that opportunity to invest in the culture, literally, by buying these fractional shares in this shoe.
Are there any other big-ticket sneakers that you’re looking at right now? Or do we have to chill for a second since we just spent $1.8 million?
Well, first of all we’re always looking for big-ticket items, but we have an inventory of some of the coolest sneakers you guys are going to ever see. We were a quarantine baby even though I’ve had this idea for two and a half years. I tell people it’s not easy when you first go out to pitch to VCs that a sneaker is an asset class, and they look at you like you’re crazy and they tell you that you’re crazy.
There were times two years ago that I slept on park benches because I couldn’t afford hotel rooms going out to San Francisco to pitch this. So I know what it means to stand in front of an audience and try to sell this because I’ve done that and luckily the tide has turned. I thank StockX for that, I thank all these other companies that have come before.
They really blazed a trail to allow people’s minds to think beyond the box or the sneaker box. I’ve been there. So we literally became a real company during the quarantine. It was one of the things like, listen guys, it’s time. This is the time, let’s do it. We got nothing but time on our hands. So we thought this through, from the educational standpoint. We don’t just want to be a company that, like I said, culture vultures. That’s not us. That’s not us at all.