Does Collectors Have Potential Conflicts?

[marzoumanian]

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.