FEIGENBAUM: COINS ECLIPSED BY SPORTS CARDS

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V23 2020 INDEX E-SYLUM ARCHIVE

The E-Sylum: Volume 23, Number 49, December 6, 2020, Article 12

Greysheet publisher (and E-Sylum sponsor) John Feigenbaum thoughtfully analyzed this week's Collector's Universe news in an article Friday. With permission, here's a lengthy excerpt. Thanks. -Editor

It is both shocking and somehow predictable that the news broke this week that Collector's Universe Inc (CLCT, parent company of PCGS) would be sold to a private investor group for an astonishing price tag of approximately $700 million. The financial details have been reported extensively elsewhere (Bloomberg) so I will reflect on the perspective from numismatics' diminished side of the table.

One of the most interesting -- dare I say "humbling" -- aspects of this sale is that rare coins are clearly taking a back seat to sports cards. Numismatics has always felt like the mature parent at the teenager birthday party watching over less mature collectibles like baseball cards, or even paper money (much smaller). But the handwriting has been on the wall ever since Joe Orlando took over as President/CEO of CLCT back in October 2017. He'd been at the card side (PSA) of the company for 18 years when he was promoted to the top job, so the Board of Directors clearly knew where the future potential lay for certified collectibles.

Coin dealers I've spoken to this week are experiencing a state of collective shock. When asked about this sale, I heard a range of emotions racing though their minds. For starters, they're wondering how the heck this company could garner such a huge price tag. Those of us in the coin business have watched CLCT stock on a daily basis, much like we watch gold and silver prices. For years, share prices have bounced between $5 and $20. We've bought in the teens and sold when prices approached $20, and then bought again on the dip. This pattern was almost as predictable as the weather. We also naively perceived that the coin market dictated the company's future. Sports cards are interesting, sure, but the "real market" is rare coins, or so we thought.

CLCT was founded as PCGS (Professional Coin Grading Service) in 1986 by David Hall, and other coin dealers, for coin collectors! In the run-up to the dot-com craze of 1990 the company was rebranded Collectors Universe to expand the umbrella into a multitude of other authenticatable items, like gemstones, paper money, and sports cards. Hall was a baseball card collector so this was a natural, but the focus ALWAYS remained on the coin side of things.

As recently as this year there was news of potential scandals on the card side of things with some trimming and doctoring allegations. In July 2019, the Washington Post reported that FBI was investigating certain aspects of the card industry. Small-minded coin professionals like myself sat back in their chairs, arms folded, with a collective harrumph. This house of cards -- pun intended -- would soon collapse.

Coins were clearly the big boy in the room, we all thought, but something changed in 2020. Blame it on COVID (why not??) or credit the trend-setters and trend-spotters, but the market for collectible cards is clearly ON FIRE. I'm guessing Mr. Orlando knew it all along. Coin collecting will always be somewhat of a niche industry. We don't have dedicated media channels like ESPN with 24-hour coverage peripheral to our hobby. Sports and the personalities around them are a huge part of 21st century culture. Coins are not. During covid, most collectible categories performed well, but cards rocketed in demand and well-heeled collectors got very interested in the authentication side of the hobby. Collectible comic books are also similarly red-hot right now. I am told by a reliable source that the CGC division of Certified Collectibles Group (CCG) is growing much faster in revenue than numismatic certification at either NGC or PCGS.

I had a front-row seat to the 2020 rise of card collecting right here in my cul-de-sac, where a neighbor's teenage son dove deep into dealing basketball cards on eBay with his Dad's backing, building up a five-figure inventory with several cards in the thousand-dollar range. It's exactly the same collecting-and-trading excitement the coin market has seen at different stages over the years, but on steroids with today's online platforms and third-party grading services.

Earlier head-scratching personnel changes at PCGS make more sense now. Coins were taking a back seat. One question now is whether PGCS will stay for the ride or be spun out as an independent company. Anything is possible when Wall Street scrutinizes the numbers. If they choose to disinvest, then cutbacks, layoffs and a sale could be in the works at PCGS. If they choose to invest, new and revamped platforms and products could come along. Improved websites? CoinFacts on steroids? AI-powered mobile apps? Only time will tell. Maybe we'll get that grading robot after all. -Editor

To read the earlier E-Sylum article, see:
APRIL FOOLS 2020 (https://www.coinbooks.org/v23/esylum_v23n14a12.html)

Here's a related story from Friday's Washington Post. -Editor

When Eddie Healy was laid off from his job in July while juggling night classes at the University of Maryland law school, he had newfound time to sort through his late father's old baseball cards. The perfect pandemic project, a task Healy, 30, had been looking forward to checking off his to-do list for months, brought back good memories and even produced some buried treasure.

As he picked through the items in the storage tub containing his dad's collection, Healy uncovered sheets of glued 1969 Topps cards and a separate binder of Orioles cards and autographs from the late 1960s. He also found a couple dozen unopened 1974 Topps rack packs, with the cards of Hall of Famers Dave Winfield, Mike Schmidt and Reggie Jackson visible through the cellophane wrapper.

Healy sought a second opinion from a few memorabilia stores in the area. One showed minor interest in his cards. Another told him that 1974 wasn't a great year for Topps, and that rack packs in general weren't that valuable. Healy's own research, which included logging about 100 sales of rack packs by various auction houses over the last 20 years, suggested otherwise. Healy created graphs from his data that showed 1974 Topps rack pack sale prices were at an all-time high, and that the average sale price had jumped 300 percent from five years ago.

"The interest in the hobby overall has increased dramatically over the last year or two," Brian Dwyer, president of Robert Edward Auctions, said in a phone interview. "The segment of unopened material, be that boxes or packs, the interest in that part of the hobby has really ballooned. We have seen more and more people getting into collecting unopened material."

REA's latest auction features 23 rack packs from Healy's dad's collection. They're available in four lots of five and three separate lots for the packs featuring the visible Schmidt, Jackson and Winfield cards, as those players have rabid collector bases. As of Thursday afternoon, bidding for the seven lots, which ends Sunday, totaled more than $16,000.