Pacaso, a company that sells fractional ownership of vacation properties, is selling shares to individual investors as it struggles to adapt to a difficult real estate market.

Founded in 2020 by former Zillow executives Austin Allison and Spencer Rascoff, Pacaso bills itself as an easier, more affordable way to own a luxury vacation home. The company buys homes in vacation destinations like Lake Tahoe and the South Carolina coast, furnishes them and resells shares in the homes. Individuals can purchase between 12.5% ​​and 50% ownership of the home and use the space for a corresponding percentage of the year.

The company strives to differentiate itself from timeshare companies, noting that buyers own actual real estate, not just the right to use a property during a specific period of time, and can easily sell their shares and potentially make a profit.

Financial information filed with the Securities and Exchange Commission as part of the offering shows why Pacaso is now seeking new funding. The company’s revenue fell 59% between 2022 and 2023 after it cut marketing spending and sold fewer home shares. Last year the company lost $36 million and a year earlier it lost nearly $82 million.

Last year, Pacaso sold 329 one-eighth shares of its properties, up from 593 in 2022. More than half of the shares sold last year were resale transactions. In its regulatory filing, Pacaso blamed the decline in sales on “various macroeconomic factors, including increased interest rates and inflation, which created uncertainty among consumers about purchasing real estate,” as well as reduced marketing.

“If you have the opportunity to raise money, you should take it,” Austin Allison, chief executive officer and co-founder of Pacaso, said in a statement to Yahoo Finance. “Pacaso’s Reg A offering represents a strategic decision to diversify our investor base and raise capital in a cost-effective manner.”

Allison added that the company plans to use the proceeds from the offering to grow the business. Pacaso is selling the shares under SEC rules that allow small and medium-sized companies to more easily raise money from individuals. Up to $75 million is expected to be raised.

Pacaso’s homes require a certain level of disposable income – his offerings include an eighth-ownership share of a four-bedroom, 6.5-bathroom ski house in Breckenridge, Colorado, for $755,000, or $299,000 for the same large share of a three-room house. Four bathroom home in Palm Springs, California.

The company says its business “targets a growing market of couples and families.” The current clientele is largely wealthy, with an average household income of over $1 million and a net worth of over $5 million.

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Pacaso, which has raised more than $200 million from major venture capital firms and once boasted a “unicorn” valuation of over $1 billion, sells shares to the public for a minimum investment of $1,000.

The campaign touts the opportunity to invest alongside top venture capital firms like Softbank and individual angel investors, including former Starbucks CEO Howard Schultz. It points to internal research showing 20 percent growth in co-ownership and argues that recent interest rate cuts are increasing customer demand in a difficult affordability market.

Investing in an early-stage startup is ultimately a risky venture: Pacaso’s offering circular provides an overview of a number of investment risks, including the fact that there is currently no established market for its shares and investors should be prepared to hold them indefinitely time to hold.

Stock offerings aimed at the general public have existed in their current form since 2015, when the SEC relaxed certain fundraising rules. A 2023 study of these filings by David S. Krause, an associate professor emeritus of finance at Marquette University, found that such offerings successfully gave startups more access to capital, but suggested that more research is needed on the long-term perspective Companies should be operated performance and investor protection.

Glenn Downing, co-founder and principal of investment adviser CameronDowning in Miami, said he emphasizes to his clients interested in funding startups the difference between saving, investing and speculating.

“Speculation is at the extreme end of the risk spectrum, and here the expectation is less about a return and more about the chance of making a big hit,” Downing said. “Money provided for speculation should be money that the investor can afford to lose.”

Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages and home insurance.

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