Does Collectors Have Potential Conflicts?
 

Nat Turner, Collectors’ CEO and chairman, loves collecting cards. I mean, it’s a prerequisite, right? Last March’s Forbes article (“The Sports Card Industry Is Having A Tech Revolution, And This Company Wants To Lead The Charge”) revealed he owns more than 15,000 graded cards appraised at over $100 million. That’s a passionate collector.

On the surface having him run the show at PSA looks wonderful. But after reading the article and doing some online research on Mr. Turner I felt….queasy. For some reason, the 1985 song, “Opportunities (Let’s Make Lots of Money)” by the Pet Shop Boys popped into my head. Why? It’s complicated.

Forbes loves this guy. Four years ago it put him on its cover as part of its 30 under 30 list in the healthcare category. And he deserved to be on this list. He’s the cofounder of Flatiron Health, an electronic medical record company that allows computers to analyze every interaction between a doctor and a patient. Doctors pay to use the data. No more pieces of paper in a file. The information is now on a computer and that’s helped to save lives. Turner sold this business for $1.9 billion. But he’s not sitting back and traveling the world with his young family.

When the pandemic hit the U.S. in March 2020, he returned home and lived with his parents for six months. That’s when the passion he had for collecting cards when he was a kid reignited. Big time. So he decided to pursue PSA.

His timing to conduct a full-frontal attack was impeccable. Even before the pandemic hit, PSA, at the time a subsidiary of Collectors Universe, a public company, was struggling to keep up with the demand for its grading services. Joe Orlando led the company back then. He was first and foremost an avid collector who started with the company in its early days and was eventually promoted to be PSA’s top dog.

But as the aforementioned Forbes article reveals, when the pandemic began Orlando was caught with his pants down. It was the pandemic that fully exposed PSA’s weaknesses. Specifically, according to current PSA President Kevin Lenane, the company never had a general counsel, a head of human relations, or a financial planning and analysis team. It became vulnerable to a takeover when customer service collapsed.

And that’s what happened in February 2021. Turner turned to D1 Capital Partners and Cohen Private Ventures to purchase Collectors/PSA for $850 million. It was taken private. Now what?

Stopping card submissions was a smart move. Hiring new employees to grade cards and training them falls into the same category. Expanding its current building and opening a 130,000 sq ft office in Jersey City, N.J., also was wise.

Technology is being addressed through a software platform called Card Manager, which fingerprints cards through artificial intelligence.

This hobby (oops, I mean industry) is growing in leaps and bounds. The companies within it must have professional management and with Turner’s arrival on the scene at PSA the prognosis for success is excellent.

So why do I feel queasy? It’s the last two paragraphs of the Forbes article that jolted me. As they note, I too believe what we’re witnessing now is a fundamental rethinking of a century-old industry. As the company’s coo, Mike West, is quoted as saying, “These guys are kind of a little bit unconstrained. It’s: What should the hobby be?”

I’m queasy because I believe Collectors runs the risk of growing too fast. It seems to be all about, “Let’s buy, upgrade and form these partnerships to make gobs of money.”
On the surface, nothing wrong with that. It’s capitalism at work. But can it be accomplished with integrity? Turner now has great power and with great power comes great responsibility. It’s the Peter Parker principle.

Will the lines blur between the companies under Collectors’ domain? For example, a chill went through me when it bought Goldin Auctions in July 2021.

The two companies promised that they will operate independently. A grading/authentication company and an auction house under one roof? Could any of those new PSA graders be pressured to give preferential treatment to cards that will be auctioned through Goldin Auctions? Will a card owner be pressured to auction his newly-graded cards through Goldin? I sure hope not. Just how thick is the firewall?

Hey, I don’t know Mr. Turner from Adam. For the sake of this great industry I only hope that he maintains a solid moral compass and continues to do the right thing when faced with the inevitable unforeseen challenges. Has he bitten off more than he can chew? We’ll see.

Turner is a guy who buys and sells companies. My guess is that he and his group will not be at Collectors for a long time but will sell it off or take it public, again.

As for how they will run it or are running it...Making lots of money is what every company focuses on.

Prior to Turner and the investment group buying CU, I think if you ask most people they will tell you CU was knee deep in conflicts of interests. Not sure Turner and his group could do worse.

I've mentioned concerns with how the industry proceeds on various occasions. Spoken out about how there is NO outside or successful independent oversight of the TPGs, no centralized, non-profit hobby-led group that is calling the shots and setting unified and consistent standards for the grading and industry as a whole. Why are TPGs able to each individually set their own standards for grading, and apparently change them at will over time? Who actually decides what a grader has to learn and know, and exactly what is the curriculum and standards they have to learn, and who exactly is even qualified to even teach them? We, the collectors who actually created and make up the hobby, should be the ones deciding and controlling such questions and issues. Sadly, we've let the businesses in our industry take over and run things, and have no one to blame but ourselves for letting them.

There should be ABSOLUTELY NO REAL OR PERCEIVED bias or conflicts in the hobby when it comes to grading. And that means owners/investors/employees of TPGs should not ever be allowed to have cards they own graded by any TPG they are currently involved or invested with, or working in or for. But there is no law against that or other provisions in place to stop such potential abuses, are there? And there should also be no grading fees that are contingently based on a card's value, as this is most definitely fuel for perceived, if not actual, grading bias and conflict of interest. There should also be a single and unchanging grading scale and set of standards put forth by those in hobby, that ALL TPGs should be required to adhere to and follow, and they should all be subject to licensing, oversight, and periodic peer review to determine that they are adhering to and complying with those independent standards. Same goes with training and education of graders. That shouldn't be decided and left up the individual TPGs to each do what they want.

Instead of staying as a hobby, this is definitely turning into an even bigger investment/asset based industry. The OP mentioned PSA and Nat Turner, and their alliances/acquisition of Goldin. They also acquired Genamint and likely other strategic additions I'm not even aware of. But they aren't alone. Look at the changes, alliances, and acquisitions Fanatics has made, and how their ownership includes professional sports leagues and the related player's unions/organizations for those sports, as part of them. They are doing the same thing PSA and Nat Turner's group are doing, acquiring bigger and bigger chunks of the card/memorabilia collecting (and related) hobby/industry, to control and make money off of it. They are creating vertical business conglomerates to take over and control large parts of this rising industry, and make the most money they can off of it.

The problem is that it is probably too damn late for those actual collectors and hobbyists to really do anything about it now. The proverbial horses have long been out of the barn. There are too many different and uncoordinated factions among collectors and participants in the card/memorabilia hobby and industry today to ever be able to get enough agreement among all involved parties to ever put the TPGs, AHs and other major commercial participants in this "industry" in their place, subject to what "we" the actual collectors want and need, not what the businesses out to make money off of us keep telling us to do. And absent reaching a point where the government would somehow see fit to step in and impose regulations and independent oversight on these commercial ventures now controlling our card/memorabilia hobby and industry in regards to things such as grading standards, independence, or the like, there most likely isn't ever going to be anything to change these business concerns calling the shots in our hobby now, or from continuing to be controlling and directing us and our beloved hobby in the future.

some very good points

I especially would love to see some type of industry oversight/standard of the grading companies and standards that they all should be following for consistency

I think the fact that the first card PSA ever graded was graded incorrectly and was done to try and help establish them in the business is a huge red flag.

I went through a phase where I thought graded cards are the solution to a lot of problems, but I've moved past that. I'd only ever grade in the future if I planned to sell the cards for a profit to facilitate purchases for my actual collection.

As for Nat Turner, the guy is a legit card collector and he loves it. Telling him that he can no longer get cards graded would be tough, but there is an obvious conflict of interest there if he is submitting raw cards to get graded by the company he owns, especially since a guy with his wealth is probably not submitting a bunch of junk wax era commons for grading.

Turner shouldn't have to stop getting cards graded, just not graded by a TPG that he at the same time works for/with, has ownership in, or any other connections or relationships. Any company/person in the business of giving a professional opinion on anything, should be independent and without bias or conflict of interest in the rendering of such an opinion in both fact AND appearance.

Nat should ONLY be sending any cards he looks to be getting graded now to any TPG other than the one he owns. Of course, how would we ever find out if he was having PSA still grading cards for him? There is virtually (and pretty much literally) no transparency, independent oversight, or outside policing of the entire TPG business/industry that I'm aware of. I am not saying or accusing any TPG of intentionally doing anything illegal or wrong, but if a TPG's sole purpose is to give unbiased opinions as to the authenticity and condition of cards they examine and grade, you would think that the TPGs themselves would be going out of their way to promote and showcase their independence and fairness in consistently giving honest and totally unbiased opinions to the public, and thus their potential customers. At least if that's what a TPG is really all about.

Again to my point, David Hall, who started this company submitted truck loads of T206s and who knows what else while he was with the company. Nothing new here if Turner submits, collects, etc. Was mentioned in one of his interviews that he is so impassioned with the hobby that he moved his office into the grading area.

Oh I agree, it was an obvious conflict for David Hall too

There should be an at least informal advisory independent hobby oversight group about grading, authentication, auction ethics, etc. Maybe it could be done through SABR.

However, as everyone knows, the hobby is full of conflicts of interest, etc.

SABR is about history and research, not necessarily collecting cards. It is also strictly baseball oriented, whereas TPGs grade cards from all sports, and beyond, such as Pokemon, Magic the Gathering, etc. As I noted earlier, with so many different factions and groups into collecting and grading, it will be virtually impossible to find a group/venue with which to unite them all. The perfect time to have set up such a group may have passed back in Burdick's time. He would have been the perfect person to establish and head up a true collector's organization/club that could set standards, and have current TPGs possibly toeing the line or face ostracizing and loss of business from members who would not use their services if the collecting club/organization did not approve.

Unfortunately, too many people/businesses have too much time, effort, and especially money, tied up into graded cards of existing TPGs to probably ever allow such a new group to threaten the current status quo. It may take a catastrophic scandal, or other unbelievable and unforeseen development, to rock the card collecting hobby enough to where such significant changes would ever have a snowball's chance in hell of succeeding and improving the TPG industry from where it currently sits, unfettered, uncontrolled, and answering to no one but itself.

I picked SABR because it is a well-known and respected organization that knows how to make committees.

David,

Agree with you 100%, but the trick is getting Pokemon and other such collectors to buy in. Because of all the different collecting factions, we might have better luck with a new organization encompassing ALL the different types of collectors out there. And have that new organization then approach groups like SABR for their support and endorsement. Using SABR will likely make a lot of people think it is primarily a baseball card-centric issue/focus, which is certainly not what you would want.

SGC grades cards for its owner and employees, no?

I really don’t think you need to worry about it. If history repeats itself, Mr. Turner will sell the company in 2-3 years.

Does Nat Turner and/or Collectors have conflicts of interest? Yes. No qualifiers needed - they do.

And the fact that he didn't immediately announce a series of policies after buying PSA and the auction companies to eliminate those conflicts tells you he doesn't care. And that there's a very high probability the conflicts will be exploited.

The catch-22 is that the collectors, dealers and auctioneers are the ones who know the most about cards and grading.

Anyone with zero conflicts of interest is probably someone with no knowledge.

One thing that would give SABR more universal cache and respect is that it's at a university. It's part of, or at least housed at, the Walter Cronkite School of Communication at Arizona State University. Not too many hobby groups can claim that.