Notwithstanding the fact that natural colour diamonds, precious gems, and jewelry incorporating same (hereinafter called the “Property”) have, for the most part, appreciated in value over the last 5 to 10 years at the wholesale level it is undeniable that many investors/collectors who have entered this market have been unable to remarket/liquidate their portfolios. We opine that the reasons are as follows:

 

1. They paid a retail price for their property at the time of acquisition;

2. The dealer (seller) of the Property charged a significant mark-up price well beyond the wholesale value; which may have been unconscionable in some cases;

3. The dealer (seller) had no realistic or viable exit strategy in place to assist the buyer in their efforts to remarket/liquidate and in many cases the seller represented otherwise;

4. A dealer (seller) of Property is more inclined to sell its own inventory to third-party buyers as opposed to the holdings held by its clients because the dealer profit margins are higher;

5. Investors/collectors are for the most part reliant upon the dealer who sold them the Property because the investor/collector does not necessarily have the contacts or expertise to remarket their holdings independently of the dealer.

 

It is our experience in dealing with individuals who have acquired Property that the vast majority have done so for investment purposes with the intention of of earning a profit. We reiterate that few diamond/precious gem dealers (if any) who sold Property to its clients provided them with a realistic or viable exit strategy enabling them to earn a profit or, in many cases, the return of their capital outlay. Thus, the void in the marketplace.