What will Collectors Holdings do with SGC?

[hcv123]

I've thought, read and talked a lot about it. Here are my current opinions:

1) I think Collectors primary motivation here was defensive. To take away the opportunity from Fanatics to buy SGC which would have almost doubled their market share to 17% and growing. SGC I think was growing fast, with Fanatics $ behind them could have done some damage to PSA's 78%. PSA is already owns 78% of the market, I don't see that additonal 7% as a big deal to them on its own.
2) So they own it, now what. If they fold SGC, they lose $$ (the money they just invested) and market share (there are many loyal SGC customers who would not submit to PSA). If they invest in it and grow it, they have an incredible opportunity to make more $$ and grow total market share. In fact I think it will be considerably easier for them keeping both companies running independently, to grow SGC business than PSA business! It makes A LOT of business sense to run both companies and is counter intuitive from a business perspective to find SGC.
3) I don't see them changing crossover standards either - if they started accepting SGC grades = PSA grades, it dilutes the value of the PSA cards/brand.
4) I could see a consolidation of SG & A to run the company leaner. I could also see some pricing changes.
5) I could see PSA set registry technology shared to bring back an SGC set registry - creating greater competition between the 2 companies! Which serves to benefit the parent company.

The more I think about it, the more keeping the companies operating and competing independently makes a lot of business sense!

I am still uncomfortable and as a collector and dealer am fearful of some of the "what ifs", but logic tells me the fear is really just that fear (of change). Time of course will tell. I'll be hoping for the best.

[Peter_Spaeth]

I agree with Howard there likely was a defensive motivation as part of the equation. That said, I think you're (1) underestimating the huge revenues they would make from crossover if they eventually discontinue the brand and (2) overestimating any loss of market share. There's noplace else to go, people who want slabbed cards for the most part are going to submit to PSA in my opinion if there is no SGC per se. And I think there likely are efficiencies to be gained by folding in the SGC brand vs. inefficiencies in propping up two brands one of which is small. That said, I have no idea.

[Rhotchkiss]

Originally Posted by Peter_Spaeth

I agree with Howard there likely was a defensive motivation as part of the equation. That said, I think you're (1) underestimating the huge revenues they would make from crossover if they eventually discontinue the brand and (2) overestimating any loss of market share. There's noplace else to go, people who want slabbed cards for the most part are going to submit to PSA in my opinion if there is no SGC per se. And I think there likely are efficiencies to be gained by folding in the SGC brand vs. inefficiencies in propping up two brands one of which is small. That said, I have no idea.

Peter, the huge revenues are a one-time event. I suppose if they make enough to reimburse what they paid for SGC, then it’s a wash. But that seems dumb to pay good money for a company hoping you recoup your purchase price from crossover fees as you kill the company.

Inversely, SGC has intrinsic value and income stream. You can earn a return from operating it now, and likely increase that return (and PSA profits) by combining efficiencies.

Buying SGC for one-time cross-over revenue is short term gain for long term pain, or maybe break even. Running SGC, which is growing, and maximizing efficiencies is a short term gain and long term gain.

And, I do believe PSA will lose some market share if they shut down SGC. Those collectors, and many in prewar/vintage are collectors (vs investors) don’t care so much about the flip and will move the CGC. Hake’s has some prewar item, including to Baltimore News Cards, that look real nice in CGC flips.

[Peter_Spaeth]

Originally Posted by Rhotchkiss

Peter, the huge revenues are a one-time event. I suppose if they make enough to reimburse what they paid for SGC, then it’s a wash. But that seems dumb to pay good money for a company hoping you recoup your purchase price from crossover fees as you kill the company.

Inversely, SGC has intrinsic value and income stream. You can earn a return from operating it now, and likely increase that return (and PSA profits) by combining efficiencies.

Buying SGC for one-time cross-over revenue is short term gain for long term pain, or maybe break even. Running SGC, which is growing, and maximizing efficiencies is a short term gain and long term gain.

And, I do believe PSA will lose some market share if they shut down SGC. Those collectors, and many in prewar/vintage are collectors (vs investors) don’t care so much about the flip and will move the CGC. Hake’s has some prewar item, including to Baltimore News Cards, that look real nice in CGC flips.

Time will prove one of us right and the other wrong. My guess is the brand is terminated by mid to late 2025. We'll probably have clues one way or the other before then.

[JollyElm]

nostradamusbaseballcards.jpg

Look, I'm not sure if it has any bearing, but I did find this, and it might prove to be somewhat pertinent...

Nostradamus Quatrain:
"The younger lion, shall embrace the elder,
On the field of combat, in a duel for gold;
Through armor of plastic, and numbers festooned,
Two big cats together, but one to die a cruel death...(the rest is written in the margins of his almanac, and it's only a loose translation) and I further prophesize that there shall be a joint registry or something, so that's cool. 2024 is going to be off-the-hook, my future homies!!!!"

[toledo_mudhen]

If I were PSA and having just acquired SGC - I would :

Introduce a Brand New Slab as the Brand New Standard thus forcing both camps to send in EVERYTHING they got for Regrade/Reholder

That's if I were PSA

[Leon]

I predict SGC will lose market share in the future.
.

[Snowman]

Originally Posted by Peter_Spaeth

I agree with Howard there likely was a defensive motivation as part of the equation. That said, I think you're (1) underestimating the huge revenues they would make from crossover if they eventually discontinue the brand and (2) overestimating any loss of market share. There's noplace else to go, people who want slabbed cards for the most part are going to submit to PSA in my opinion if there is no SGC per se. And I think there likely are efficiencies to be gained by folding in the SGC brand vs. inefficiencies in propping up two brands one of which is small. That said, I have no idea.

I think you're overvaluing the value of the crossover revenue component. First, it's a one time shot. Collectors makes more crossover money by keeping both brands alive and allowing submitters to continue to cross cards back and forth. Second, simply taking on more crossovers comes at an opportunity cost. There are always tradeoffs. Their overall bandwidth is still limited by headcounts, and the tradeoff to offer crossover specials is to not offer other specials that they otherwise would have. And hiring enough extra people just to expand their capacity for long enough to handle the crossover wave only to no longer need them when it's over probably isn't worth the effort and added expense.

[Snowman]

Originally Posted by hcv123

I've thought, read and talked a lot about it. Here are my current opinions:

1) I think Collectors primary motivation here was defensive. To take away the opportunity from Fanatics to buy SGC which would have almost doubled their market share to 17% and growing. SGC I think was growing fast, with Fanatics $ behind them could have done some damage to PSA's 78%. PSA is already owns 78% of the market, I don't see that additonal 7% as a big deal to them on its own.
2) So they own it, now what. If they fold SGC, they lose $$ (the money they just invested) and market share (there are many loyal SGC customers who would not submit to PSA). If they invest in it and grow it, they have an incredible opportunity to make more $$ and grow total market share. In fact I think it will be considerably easier for them keeping both companies running independently, to grow SGC business than PSA business! It makes A LOT of business sense to run both companies and is counter intuitive from a business perspective to find SGC.
3) I don't see them changing crossover standards either - if they started accepting SGC grades = PSA grades, it dilutes the value of the PSA cards/brand.
4) I could see a consolidation of SG & A to run the company leaner. I could also see some pricing changes.
5) I could see PSA set registry technology shared to bring back an SGC set registry - creating greater competition between the 2 companies! Which serves to benefit the parent company.

The more I think about it, the more keeping the companies operating and competing independently makes a lot of business sense!

I am still uncomfortable and as a collector and dealer am fearful of some of the "what ifs", but logic tells me the fear is really just that fear (of change). Time of course will tell. I'll be hoping for the best.

Well said and well reasoned Howard. I pretty much agree with all of this.

[raulus]

Originally Posted by hcv123

I think Collectors primary motivation here was defensive. To take away the opportunity from Fanatics to buy SGC which would have almost doubled their market share to 17% and growing. SGC I think was growing fast, with Fanatics $ behind them could have done some damage to PSA's 78%. PSA is already owns 78% of the market, I don't see that additonal 7% as a big deal to them on its own.

From what little I know, the defensive strategy seems like it could be a big part of the equation.

For some reason, this tie-up keeps bringing to my mind the merger between Alaska Airlines and Virgin America. In large part, that was also defensive to keep the east coast regional competition from getting a big foothold out west.

There's certainly room to argue that this situation is different, and the end result will be different too. But after that merger, while the Virgin America brand continued for a year or two, they were eventually swallowed up into the larger Alaska brand.

Then again, we're all just guessing. And I'll definitely vote for the answer that Nat probably still doesn't entirely know where this train is going.