The Sports Card Industry Is Having A Tech Revolution - PSA Forbes Article

[parkplace33]

Anyone else see this article? Interesting read

https://www.forbes.com/sites/brettkn...DbgHJWdrb1D3h4

[Johnny630]

I really like the way this new blood is running the company, lots of great things are coming. Quite frankly I’m glad the days of $12 service are over.

[rugbymarine]

That was a much better read than I expected.

[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.

[parkplace33]

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.

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.

[Johnny630]

Originally Posted by parkplace33

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.

CSG and HGA were temporary band aids while PSA stopped taking submissions. PSA will continue to dominate only by a wider margin over their competitors.

[BobC]

Originally Posted by parkplace33

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.

I wouldn't be so quick to just summarily dismiss CSG as a small, filling in the gap, card grading company. The overall company they are part of is well known worldwide I understand for their other grading services. So, this new venture of theirs into card grading is no fly-by-night operation. Plus, as I understand it, they are going to compete with PSA in that they have a registry set up, unlike SGC, Beckett, or any of the other small, fringe grading services out there. Plus, don't forget their rather slick move in partnering with Ebay to offer their new authentication service. I can easily see CSG using that affiliation as a possible springboard to generate more business in the future. For now, all they need do is maintain and provide a consistent, accurate, timely, and reasonably priced authentication and grading service that competes with the other TPGs, especially against PSA as to timeliness and prica, and over time more and more people in the hobby will become more familiar and trusting of them. In the long run, it will behoove PSA to get their pricing and turnaround times down closer to where their competition is.

[BobC]

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.

Chase,

Regarding your first point on valuation, most companies are usually valued at some agreed upon multiple of EBITDA, and EBITDA is generally based on GAAP. They had just purchased Collectors Universe only a little over a year ago, and obviously established a price, most likely using CU's EBITDA just prior to the sale, with maybe some possible adjustments for projections. In making that statement as to the current value, they probably took their most recent actual (or maybe even projected) EBITDA from the company's operations and multiplied that by the same multiple used for their actual purchase of the company. Based on that, they are likely talking about multiple times increases in net Earnings Before Income Taxes, Depreciation, and Amortization. Would make sense with the surge in submissions, accompanied by the huge price increases, they have experienced during the pandemic.

Also, don't forget the recent Genamint acquisition as well. Don't know if they added that into this valuation as part of the overall company, or if they are keeping that separate.

To put it simply though, they are likely making a boatload of even more money right now than they were when it was still a public company.

[Lorewalker]

Originally Posted by BobC

Chase,

Regarding your first point on valuation, most companies are usually valued at some agreed upon multiple of EBITDA, and EBITDA is generally based on GAAP. They had just purchased Collectors Universe only a little over a year ago, and obviously established a price, most likely using CU's EBITDA just prior to the sale, with maybe some possible adjustments for projections. In making that statement as to the current value, they probably took their most recent actual (or maybe even projected) EBITDA from the company's operations and multiplied that by the same multiple used for their actual purchase of the company. Based on that, they are likely talking about multiple times increases in net Earnings Before Income Taxes, Depreciation, and Amortization. Would make sense with the surge in submissions, accompanied by the huge price increases, they have experienced during the pandemic.

Also, don't forget the recent Gennamint acquisition as well. Don't know if they added that into this valuation as part of the overall company, or if they are keeping that separate.

To put it simply though, they are likely making a boatload of even more money right now than they were when it was still a public company.

Hi Bob,

Not sure what the value is of Genamint but they have acquired multiple businesses like WATA and Golding Auctions to name two, that would add to gross revenue. Genamint, if it is being used, simply assists in speeding up daily operations, which presumably saves payroll and would increase net income and gross income. There is some value to having Genamint but not sure what that would be or how you would determine that.

They did raise fees and while people are still submitting I just do not think that would amount to THAT much of an increase in the value of the company. Subs had to be down once they suspended lower tier services. Turning 8 million of the 13 million of the backlog which existed at the time of acquisition into revenue certainly helps but that presumably was built into the valuation at the time CU was acquired.

From my vantage point (you would know much more about this than I would) and with of course much less financial disclosure as a private co it is hard to swallow the company is really worth 5x what it was.

Could you envision them taking the co public again today and getting a 4 bil valuation? I just don't see that they have done enough to justify that value. I am sure I am wrong though.

[Republicaninmass]

Nobody is sure what will happen, however, they are all speculators:

that prices wont come down
anything you buy (grade) will go up
cards are liquid assets

"This time its different, after a meteoric rise, we wont see a pop of the bubble" is the predominant theory.


All hallmarks of a euphoric market.

First he innovators, then the imitators then come the fools. -WEB

All these indicators makes it incredibly hard for me not to sell into strength.

Sent from my SM-N950U using Tapatalk

[Johnny630]

Originally Posted by Republicaninmass

Nobody is sure what will happen, however, they are all speculators:

that prices wont come down
anything you buy (grade) will go up
cards are liquid assets

"This time its different, after a meteoric rise, we wont see a pop of the bubble" is the predominant theory.


All hallmarks of a euphoric market.

First he innovators, then the imitators then come the fools. -WEB

All these indicators makes it incredibly hard for me not to sell into strength.

Sent from my SM-N950U using Tapatalk

I would normally agree with you for selling into the strength but I’ve been dead wrong the past three years. I think that the amount of new high dollar buyers has changed the whole game. Sure mid grade and low grade is coming down and will more but high end 8’s and up or pre war 6’s and up....it’s to the moon.

[Republicaninmass]

Exactly, this time its different! Trees grow to the sky. We should value clips of guys doing a slam dunk on how many clicks they get.


I keep working my signed set, and just hope the euphoria lasts, or starts again when I sell!

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