Asset tokenization shows underwhelming performance

An image promoting Seoul Auction Blue's investment offering for shares of Andy Warhol's "Dollar Sign" Series 8 / Courtesy of Seoul Auction Blue

The asset tokenization market in Korea has resumed, yet is showing underwhelming performance. This raises questions about the success of trading token securities — fractions of traditional assets like art — expected to start at the Korea Exchange within the first half of the year.

According to industry sources, Sunday, Seoul Auction Blue recently concluded its investment offering for shares of Andy Warhol's "Dollar Sign" Series 8, with a subscription rate of 86.9 percent. The target for the offering was 700 million won ($523,364). Despite the publisher covering 10 percent of this target, the offering failed to sell out. Seoul Auction Blue will absorb the remaining amount and proceed with issuing the planned security tokens.

Earlier, Yeolmae Company undertook 17.9 percent of the shares following its investment offering for Yayoi Kusama's "Pumpkin." As the first operator to resume asset tokenization, it attracted significant attention, evidenced by a competitive subscription rate of 6.53:1. However, many investors ultimately chose to relinquish their rights on the payment day.

Despite Warhol and Kusama's prominence in the art market, the overall market downturn is seen as a reason behind the undersubscriptions of these offerings.

Additional fees associated with art dealing, such as carrying and appraisal charges, also present barriers. Delving into the details of Warhol's artwork, approximately 626 million won of the total 700 million won offering was allocated to the art pieces themselves. The remaining 73 million won, or 10 percent of the price, was set aside for additional fees required for purchase. As investors face another 10 percent in fees during the sale, they would only see profits if the price of the art increases by at least 20 percent.

This news might be concerning to firms that have sought to enter the market this year following its formalization by financial authorities. The Korea Exchange is gearing up to allow the trading of security tokens on the stock market.

However, some believe it's too early to hold a negative outlook on the overall security token market. The cases highlighted so far have focused exclusively on art, but tokenized assets in other categories could attract more interest. Reportedly, dozens of corporations in Korea are planning to issue security tokens based on a variety of assets, including Korean beef, real estate and intellectual property rights.