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Originally Posted by Lorewalker
A few things that stand out to me in that article are:
"...pushing its valuation to $4.3 billion. That represents a five-fold increase from the roughly $850 million acquisition price last February..."
Wondering where they base that valuation? Is that valuation based off of the 300 million in gross revenue? CU at the time of acquisition estimated 35 million for Q2 revenue and had over 30 million in Q1. Annualized it would be reasonable to project 150 mil in gross revenue. So did the board screw shareholders and approve a sale well below the value of the company? They had 13 million cards to be graded at the time of purchase. That is a huge Receivable.
The group may have paid 853 mil for the co but they also spent money after the acquisition buying other companies and expanding operations so the 5 fold-increase while an accurate statement does not paint the whole picture. Additionally there are operating costs that have increased substantially. I just wonder if they are as profitable at this time as they were prior to being taken private.
"...PSA now has more than 100 graders, up from 44 at the time of the acquisition and the 14 the division had for many years."
In order to get those 13 million cards graded it had to be done but how do you find 56 more qualified people to grade cards? How do you remain consistent with an operation that large? Not sure that you can. Card grading might not be neurosurgery but in just over a year they located 56 qualified graders?
"A 2019 scandal exposed corrupt collectors selling altered cards through the marketplace PWCC, many of which carried grades from PSA."
2019 scandal exposed corrupt collectors selling altered cards? Maybe it is semantics but the bulk of the dudes selling altered cards through PWCC, through their own ebay accounts, etc are not collectors but dealers. Dealers who PSA promoted or promotes and at the very least allowed to submit the bad material.
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I noted those but also these:
On a single day in late March, the company received 660,000 cards. “We literally broke the USPS in Southern California,” Turner says. “They called us and said they couldn’t manifest the boxes. I think we rented school buses with security guards and drove to USPS to pick them up.”
Turner says he hopes to return to the normal submission process in the next few months, but all involved concede that the days of $12 service fees for low-end cards are over.
Then there’s the competition. SGC has taken advantage of PSA’s higher prices, particularly on the lower end, and smaller grading services like CSG and HGA are hoping to capitalize as well. New entrants are joining them. A year ago, Dallas Card Investors happily functioned as a bulk submitter, essentially working as a middleman between collectors and PSA. Now, says owner Bradley Crenshaw, it’s pivoting its business to become a grader itself.