Brent has left PWCC

[nolemmings]

Originally Posted by Steve D

Exactly; Brent wins, by not losing.

Fanatics takes over PWCC's debt, he saves what he already has.

Steve

I am not at all clear on the debt situation, but unless the debt was literally forgiven-- a tax event--he likely has co-liability, whether primary or secondary. I suppose the debt could have been paid off as part of the transaction, in which case he basically did get paid. Otherwise, I assume that he has indemnification or reimbursement rights in the event Fanatics defaults on the debt, but that still leaves him on the hook while the debt remains owing; i.e. I doubt he was completely released. I also assume that he signed personal guaranties on these debts, or else he has no exposure absent fraud or similar skullduggery.

Finally, I am uncertain what what was meant in the original post. Loaning money against undersecured assets (overvalued cards) does not create debt for Brent-- it just adversely impairs collectability for him. So long as his borrowers are current on repayment and don't default, there is nothing to see, even if he used those loans as collateral to get his own, provided there is no provision that allows his lender a right to call its loan due upon the occurrence of certain events.

This is one of those days where I'm just a step or so behind on my thinking. Hopefully others can make it simpler for me.

[Leon]

Originally Posted by nolemmings

I am not at all clear on the debt situation, but unless the debt was literally forgiven-- a tax event--he likely has co-liability, whether primary or secondary. I suppose the debt could have been paid off as part of the transaction, in which case he basically did get paid. Otherwise, I assume that he has indemnification or reimbursement rights in the event Fanatics defaults on the debt, but that still leaves him on the hook while the debt remains owing; i.e. I doubt he was completely released. I also assume that he signed personal guaranties on these debts, or else he has no exposure absent fraud or similar skullduggery.

Finally, I am uncertain what what was meant in the original post. Loaning money against undersecured assets (overvalued cards) does not create debt for Brent-- it just adversely impairs collectability for him. So long as his borrowers are current on repayment and don't default, there is nothing to see, even if he used those loans as collateral to get his own, provided there is no provision that allows his lender a right to call its loan due upon the occurrence of certain events.

This is one of those days where I'm just a step or so behind on my thinking. Hopefully others can make it simpler for me.

Many of them walked away from their loans, is my understanding. That created (bad) debt because of the money lent not being repaid .
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[Snapolit1]

Likely he went from an extremely wealthy dude to a regular wealthy dude. There are worse fates in life.

[bobbyw8469]

Originally Posted by Leon

Many of them walked away from their loans, is my understanding. That created (bad) debt because of the money lent not being repaid .
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Correct...and now they held cards whose values dropped lower than what the money loaned out was.

[Exhibitman]

Originally Posted by bobbyw8469

Correct...and now they held cards whose values dropped lower than what the money loaned out was.

Sounds like what a lot of commercial lenders are experiencing in office buildings. They prefer to carry the non-performing loans on their books rather than realize the losses. Brent probably did not have that option.

[Oscar_Stanage]

The loans were ultimately made to customers with cards in the vault. The way asset based lending works, there is a steep haircut relative to the card price. If a customer had $100k market value of cards in the vault, they were likely only able to borrow $60k, maybe less. It’s unclear to me what exposure PWCC had as a firm. The hedge fund provides the capital for PWCC to tap for lending. If the borrower defaults, PWCC simply sells the cards in possession and pays back the hedge fund. In all likelihood , the hedge fund is the direct counterparty to the customer and PWCC simply stands in the middle and collects a fee with no risk. The beauty is that PWCC holds the assets, so the only risk to the hedge fund is that the price falls below the haircut value.

[conor912]

Originally Posted by Oscar_Stanage

If a customer had $100k market value of cards in the vault, they were likely only able to borrow $60k, maybe less. .

I’d be really surprised if it was close to 60%. Hell, once the dust settles on an AH consignment, a seller is generally lucky to see 2/3 of FMV.

[Oscar_Stanage]

Originally Posted by conor912

I’d be really surprised if it was close to 60%. Hell, once the dust settles on an AH consignment, a seller is generally lucky to see 2/3 of FMV.

Maybe so. But in this case it’s PWCC selling through their own channel so not sure they wouldn’t just sell the card with no vig. I don’t know much about the details other than what is on the internet, but I do know that lenders barely take any risk outside of a disaster scenario so I think my originally description is close to accurate/.

Looking at the timeline, my guess is that PWCC’s revenue dropped substantially once they left the EBay platform in 2021. The lending business came a year later and was likely a creative attempt to generate revenue and save the business (as they still had the vault) the market didn’t cooperate - No one was flipping cards anymore, which would have been only people demanding loans. It was actually a brilliant idea, but the market dried up.

[Peter_Spaeth]

Originally Posted by Oscar_Stanage

The loans were ultimately made to customers with cards in the vault. The way asset based lending works, there is a steep haircut relative to the card price. If a customer had $100k market value of cards in the vault, they were likely only able to borrow $60k, maybe less. It’s unclear to me what exposure PWCC had as a firm. The hedge fund provides the capital for PWCC to tap for lending. If the borrower defaults, PWCC simply sells the cards in possession and pays back the hedge fund. In all likelihood , the hedge fund is the direct counterparty to the customer and PWCC simply stands in the middle and collects a fee with no risk. The beauty is that PWCC holds the assets, so the only risk to the hedge fund is that the price falls below the haircut value.

And yet everyone talking about this seems to agree PWCC had huge debt and was taken out by Fanatics at a token price. What else could account for that debt if PWCC had no risk in thesa nonperforming loans?

[Oscar_Stanage]

Originally Posted by Peter_Spaeth

And yet everyone talking about this seems to agree PWCC had huge debt and was taken out by Fanatics at a token price. What else could account for that debt if PWCC had no risk in thesa nonperforming loans?

See my next comment below. Post eBay I am guessing the revenue dried up and they were on their way out of business. That’s good enough for a token price.
Not sure I get why there would be a huge debt ? Why would loans be non performing with a huge haircut? If you read the public articles, there is a hedge fund financing all this . They are asset based lenders , they lend against collateral- machines , cars, paintings , baseball cards. they don’t take risk, its all about the haircut

[BeanTown]

Originally Posted by Leon

Many of them walked away from their loans, is my understanding. That created (bad) debt because of the money lent not being repaid .
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So Brent took all the money they had and called it a loan or dispersement (depending on how many owners they had) which basically left just the tax to pay on it. I’m sure he was making an attempt to pay back the company 1.5 percent a year to keep it legal, based on his lawyer advice. In many ways it’s a lot better than paying yourself a big Salary. Maybe for Brents next adventure he can do something with Bill Mastro and conquer a different industry. What ever happened to the FBI investigation to?