Brent has left PWCC

[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

[Peter_Spaeth]

Originally Posted by Oscar_Stanage

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

That's why I am thinking a rational hedge fund did not make these loans, Brent did or at least took on some significant risk and did not do proper valuations. We need to find someone who borrowed and see what the arrangement was.

[G1911]

Originally Posted by Peter_Spaeth

That's why I am thinking a rational hedge fund did not make these loans, Brent did or at least took on some significant risk and did not do proper valuations. We need to find someone who borrowed and see what the arrangement was.

Perhaps they valued the cards for what they sold at when PWCC was shilling to reach a fake end result, not what they could honestly sell them for when they needed to do so.

[MikeGarcia]

[Exhibitman]

Lots of the biggest modern cards fell like stones last year, whether it was the end of a frenzy, steroids, injuries or just poor performance. The 1986 Fleer MJ RC PSA 10 was a $700K card for a minute 2+ years ago and has settled back down to a pre-pandemic sub $200K range. If you loan 50% on a card and the card drops 70%+, you are at a loss, especially if you use either recourse financing or entered into specific debt covenants to get the cash to lend out, if your lending decisions were injudicious, and if you offered non-recourse loans to the card owners. My guess is that some combo of those factors was in play. PWCC may not have been insolvent but it could easily have run afoul of loan covenants that would allow the lenders to take control and force a sale. Maybe don't get greedy and stay in your lane, and definitely don't bet your company on a fickle market.



PWCC wouldn't be the first lender to get killed by collateral declining in value. Look at the commercial real estate market. Many banks are playing 'pretend and extend' for zombie commercial real estate loans right now; they know the values of their collateral have tanked. Office building owners in SF and NY and other major cities where remote working has taken root are handing keys to lenders and walking away from hundreds of millions in investments. I'm involved with one such scenario right now where my clients are waiting to see if the borrower defaults in October when the next installment payment comes due.