At The Superyacht Forum 2017, during the ‘Floating on the market’ keynote session, Remy Millott, CEO of GYG, which began floating on the AIM stock exchange in July 2017, spoke about the experience of educating investors on the difference between ‘the billionaires’ market’ and ‘the millionaires’ market,’ both of which exist within the larger superyacht sphere.
From an outsider’s perspective, and perhaps even from the perspective of some within the superyacht market, the difference is a novel or linguistic one. After all, ultra-high-net-worth individuals are defined by most as owning assets with a cumulative value of $30million or more. And yet, the billionaires’ and millionaires’ markets perform very differently in a superyacht context.
“Many of the investors that we sat down with, we had to convince them that we were not in the 25m market, the millionaires market, we had to convince them that we are operating in the billionaires’ market…[and] that it was a legitimate industry that they could invest in,” explained Millott. “The hardest thing was convincing them that we were weren’t part of the smaller end of the superyacht market that went through a lot of pain during the financial crisis…we had to defeat the preconceptions that the market we operate in is cyclical.”
In The Superyacht Annual Report 2018: New Build (TAR) the statistics clearly highlight the difference in the stability of the 70m-plus sector - the ‘billionaires’ market that Millott alludes to - and the sub-70m sectors. Unlike the 30-70m portion of the market, the 70m-plus sector has remained resilient, regardless of market fluctuations, including the well documented downturn that has occurred in the post-2008 Global Financial Crisis era. As a result, the large superyacht market arguably remains the most investable portion of the market because of the stability it has been able to prove year-on-year.
According to TAR, the 70m-plus sector has delivered an average of 11.8 superyachts annually since 2008, whereas the sub-70m portion of the market has delivered an average of 147.5 vessels annually. At first glance, you would think that the sector with highest delivery figures would be the most attractive to investors. However, when you consider that only 105 sub-70m vessels were delivered in 2017 and 10 70m-plus vessels were delivered in 2017, it is clear which market is the more consistent. Since 2008, the sub-70m market has been on a near continuous decline year-on-year, with only the dimmest flickers of recovery in anomalous years (2012 and 2016), whereas the 70m-plus sector has continued to perform as it has done, year-on-year, since 2008. Furthermore, the scale and value of these projects is exponentially larger, and requires significantly more human capital.
Part of GYG’s success in generating private equity investment and, latterly, going public, was that Millott and his team were able to prove that GYG’s market was the predictable and profitable 70m-plus billionaires’ market. Pinmar, GYG’s paint application business, works on vessels that are, on average, 72m for refit and 84m for new build, yielding an average vessel size of 78m.
Unlike the millionaires’ market, the billionaires’ market is far less susceptible to various market forces thanks in large to the robustness of each billionaire’s wealth profile and portfolio. By proving that its core business is not cyclical or likely to be affected by various broader economic market fluctuations, GYG has been able to clearly distinguish between the superyacht industry’s two separate markets and showcase that one may be more attractive to investors than the other.
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