Fractionalized domain ownership – Is it a scam, a long term play, brilliant?

Fractional domain ownership has been having quite the conversation the last couple days. John Berryhill started it off by replying to a 3 year old post written by the incomparable Bob Hawkes. Bob who is always very humble and respectful of all opinions, asked someone to remind him in 3 years if he was wrong about there being a Domain Investment Trust that would be publicly traded in 3 years.

Bob wrote:

Let me make a bold prediction: within 3 years we will have a Domain Investment Trust (DIT), publicly traded, on the same model as REITs. And once we have one, we will have many, with different regional, TLD and sector emphasis, some well diversified, some very specialized, like a DIT just for aspects of space exploration, for example. Someone can please remind me in 3 years that I was wrong.

So John posted that he was wrong.

Then there was the talk that fractional ownership is a scam, a rug pull, watching your money swirl around the toilet bowl.

You can follow the Namepros discussion here.

Brad Mugford brought the conversation to X which I like to see because there are different opinions everywhere and not everyone stays up with all 3 hubs of domaining, (Forums, Blogs, X).

Brad mentioned how to deals on Rally are a net loss for shareholders. Directions.com and HotSpot.com. I did ask Rick Schwartz what he thought, since Rick’s account is private not everyone can see his reply.

Rick said:

I think you would have to define the exact fractional ownership. But I am definitely not against it. Anything that adds liquidity is a good thing.

There was an interesting thought from @DomainPad who felt that one domain would never work, but possibly a pool of premium domain names.

DomainPad wrote:

I mentioned this last month but my take: The real solution is to group many valuable domains into a larger pool. Ex: Take 500 premium domains worth a collective $500 million and packaging them into a single tokenized batch like an REIT. You’re just replacing homes with domains.

This approach creates the liquidity under one grouped asset. Trying to tokenize individual domains is a waste of time and effort. No liquid market exists for that over the long term you only attract domain investors at the first and look how small that market is.

Domains can be tokenized but you need to do this on a big scale under one token. Having 100 people invest in one domain is not a liquid market. The idea can work but needs to be looked at differently.

Aron Meystedt who has fractionalized a domain name replied:

good points. as someone that has fractionalized a domain – if you’re going to go through the effort and hassle of SEC compliance, it might as well be for a massive packaged product like you said.

Rob Petrozzo the co-founder of Rally replied in Brad’s thread.

First mission for us at Rally is providing access at the primary level. That’s followed by liquidity on the secondary level. It’s going to take time if we want to do it responsibly, but it’s something we’re working on actively. 24/7 liquid markets like crypto and memecoins create too much distance from the book value of an asset and the price action becomes irrational – this would make a domain impossible to exit/sell in full.

In the other side if the coin, thinly traded markets tend to depress the paper value of an asset relative to the underlying “true” book value of that asset, making a domain look artificially cheap – that makes the domain look less desirable to retail. The middle ground in the interim while we continue to find market-making partners is to keep sourcing quality domains and continue to allow non-accredited investors to own real equity in those domains, while the @andrewrosener’s and category experts continue to educate the masses on their value.

It’s a long term play for us, and building the portfolio of premium digital real estate is more important to us and to the majority of investors than the daily order book.

Those who own assets and check the paper-secondary market value every single minute of the day are the ones that complain and then sell the bottom. It happens in every asset category with retail traders in the secondary market. We’re trying to avoid that and hope investors are as well when the category is so new and has so much promise in the medium and long term.

Leave your thoughts in the comments.