Collectors (PSA) Acquired SGC

[Snowman]

Much of what I've read from people both here and on various other platforms seems to be rooted in either wishful thinking or out of fear of the worst-case scenarios. Not many people seem to be putting themselves in Nat's shoes or in SGC's shoes when trying to predict what is most likely to happen.

I love game theory, and I usually try to view these sorts of things through that lens. So, what do we know?

We know that any PR message put out right now by either company means nothing about their long-term vision. They simply have to state that nothing will change and that it will be business as usual, regardless of their true intentions. But that doesn't mean their true intentions can't be to maintain both brands indefinitely. To solve that riddle, we can make some assumptions based on what we know and assume that Nat et al will act rationally.

We know PSA wants more quality vintage graders. SGC has them. Bringing them into the fold is a strong value add. We also know that PSA wants to continue to expand its footprint physically. Adding a location in FL makes a lot of sense for them. We also know that SGC has been growing significantly over the past couple years. Their growth rate is many multiples of PSAs. Had that trend continued, and had they been acquired by someone with more financial backing like Fanatics or CGC, they might have become a serious threat to PSA. So Collectors buying them out before someone else caps that threat at the knees.

But just because they bought out SGC doesn't mean they did so just to shut down competition and steal their graders (who would certainly become disgruntled employees if that were the case). It just doesn't make sense financially.

Here's what I think will happen. I think Collectors does in fact want to allow SGC to continue to operate for the foreseeable future. Not because they said so, but because it makes the most sense financially. SGC has a loyal vintage following, and PSA doesn't exactly win them over if they were to buy them out and shut it down. That would risk an army of disgruntled SGC employees all jumping ship and just moving over to CGC where they'd be welcomed with open arms. News would spread quickly that CGC is the new SGC and the vintage community would follow them over in an instant. Nat & company aren't stupid. They are fully aware of these risks. They want to keep SGC customers happy and they want to keep SGC employees happy. That said, most of the growth that SGC has experienced came from the ultra-modern side of the hobby. Those submitters are not loyal to SGC. They don't care about the cards at all. They just want to flip their cards as quickly as possible and get 10s on them. SGC is often their best option because of the turnaround times and lower grading fees. If SGC were to shut down, most of that business likely would transfer over to PSA - especially if they are able to improve their turnaround times by then.

I suspect PSA's long-term intentions are to keep SGC up and running for as long as it makes sense. If the market continues to show strong demand for SGC's services, then they'll continue to offer them. If the market turns its back on SGC as a result of the merger, then they'll be more likely to let the brand die. I doubt they have concrete long-term plans with everything completely ironed out at this point. I think what we'll see after a couple of years is a joint PSA/SGC office in FL where both brands operate independently but with shared resources; technical, grading, and operations. PSA will likely take advantage of the vintage grading experts at SGC and put them to work on both PSA and SGC submissions. FL will become their vintage hub. All bulk vintage submissions will likely be sent there. They'll allow anyone who wants to move from CA to FL to do so, and vice versa. But they won't force any of them to. This could be a good thing for us as collectors. The SGC graders have pride in their work, and they're better at grading vintage cards than most PSA vintage graders, and they know it. PSA knows it as well. These guys will eventually be grading our PSA cards. That will result in more consistent and accurate vintage grades at PSA. It will also likely result in more SGC slabs crossing over at a higher rate as they have pride in those slabs.

Turn-around times at SGC will likely slow as PSA shares resources at the FL office to balance out volumes across both brands. Grading fees (and their corresponding value thresholds) are likely to be slightly less favorable at SGC in the future, but not for a while.

I think it's premature to assume that the sky is falling. Getting rid of SGC completely just doesn't make a ton of sense for PSA. But putting them under the same roof in FL as PSA and creating a joint office does make a ton of sense. These guys are going to do whatever makes the most sense financially. And it doesn't make sense to spend $100M to acquire SGC only to shut them down, steal their graders, and piss off all their customers. That's just not going to happen.

That said, if SGC does eventually go away, it will have a measurable effect on their slab values in the limit. At first, values will remain fairly close to where they are now as the market trusts their grades and people will continue to pay top dollar for their cards because they'll have confidence that they will cross over to PSA (and I do believe they will cross over at a higher rate in the future when former SGC graders are the ones crossing them). But as time goes on and more and more of these cards get crossed over, there will eventually be a sentiment among collectors that the remaining SGC slabs that are still out there are less and less likely to cross. This sentiment will exist because it will be true. That will slowly devalue SGC slabs. But there will be a floor to how far they can fall. The market will always respect their grading, and ultimately, the cards inside are still what matters most.