Fractional Ownership

Fred Bear

Fred Bear

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So, I've listened to a lot of the stuff on Sports Cards Live and other channels on fractional ownership, so I've been trying to do some research on my own as well to determine if this would be a reasonable investment or if it's just a cool thing for in your collection.

Full disclosure - I'm a skeptic. I like my cards and curating my at-home collection. I prefer full, tangible ownership. I won't own every card and I've come to accept that. I may put a valuable card in my safe, but I don't store anything away from home at this time.

I started researching the 1979 Topps Wayne Gretzky PSA 10 that Rally will be listing. As everyone knows, it recently sold at Heritage Auctions for $600,000 ($720,000 with buyer's premium). Rally intends to list 20,000 shares at $40/share for a market cap of $800,000.

Please understand, I realize that Rally needs to make something, totally get that, but... They were the top bidder at $600k ($720k). An increase in the value of 11% (or 33%) seems steep.

Here's the continuation of my logic/thought experiment: If the IPO sells out at $40/share and 53% of shareholders agreed to sell, what price would it have to sell at for shareholders to 'make' money? If I understand it correctly, if the card went back to auction, break even would have to sell for $800k + consignment fee (~20%) + applicable capital gains taxes (~20%?), so... around $1.2M ($1M + 20%)? [It's not clear to me if Rally is selling a 'business' or if they are paying capital gains on an investment at that point. It's also not clear if they use the $600k or $720k number for 'cost' purposes. I'm sure the US Government will want their share, though.]

Is the Gretzky Topps PSA 10 really worth almost 2x what was paid for it last month? What happens if another PSA 10 is graded?

Help me understand this, please.
 
Fred Bear said:
So, I've listened to a lot of the stuff on Sports Cards Live and other channels on fractional ownership, so I've been trying to do some research on my own as well to determine if this would be a reasonable investment or if it's just a cool thing for in your collection.

Full disclosure - I'm a skeptic. I like my cards and curating my at-home collection. I prefer full, tangible ownership. I won't own every card and I've come to accept that. I may put a valuable card in my safe, but I don't store anything away from home at this time.

I started researching the 1979 Topps Wayne Gretzky PSA 10 that Rally will be listing. As everyone knows, it recently sold at Heritage Auctions for $600,000 ($720,000 with buyer's premium). Rally intends to list 20,000 shares at $40/share for a market cap of $800,000.

Please understand, I realize that Rally needs to make something, totally get that, but... They were the top bidder at $600k ($720k). An increase in the value of 11% (or 33%) seems steep.

Here's the continuation of my logic/thought experiment: If the IPO sells out at $40/share and 53% of shareholders agreed to sell, what price would it have to sell at for shareholders to 'make' money? If I understand it correctly, if the card went back to auction, break even would have to sell for $800k + consignment fee (~20%) + applicable capital gains taxes (~20%?), so... around $1.2M ($1M + 20%)? [It's not clear to me if Rally is selling a 'business' or if they are paying capital gains on an investment at that point. It's also not clear if they use the $600k or $720k number for 'cost' purposes. I'm sure the US Government will want their share, though.]

Is the Gretzky Topps PSA 10 really worth almost 2x what was paid for it last month? What happens if another PSA 10 is graded?

Help me understand this, please.
Click to expand...

I'm not a finance guy so I don't know the technical term, but it seems like they are creating an investment vehicle. People can buy and sell shares of the Gretzky - without the Gretzky ever having to go back to auction. It's an experiment in turning a hockey card into something like a stock. I have no idea if it will succeed.

All I can say is it's not for me.

Mike
 
I haven't done any research on this as of yet however it should be noted that an investment like this is completely illiquid.
In the event an investor needed to get out of their investment, I assume the company may try and create a market and find a seller for your share(s). In this event, how would they determine the price of the unit(s) at the time of selling and what type of fees might they apply to facilitate the sell/buy transaction.
 
It’s not the same but not too far off. My brother is big into horse racing. The top end stake horses are worth lots of money. Their is a website that sells shares into buying race horses. He started off buying 1% of a horse for $800. He now has a 4% stake in the horse. Owners have the ability to sell their shares in horses and can buy from others as well. The seller sets their price.
 
I get it... but its not for me. I want the card(s) in hand.

But I totally understand wanting to invest in an MJ rookie, for example.... maybe I could talk myself into that haha
 
Unless I treat this as another stock, there's no way I could see myself doing it.

Interesting concept though.
 
It's an interesting concept for sure but I'd want to let it play out a little bit to see how the buy/sell/trade process works. There's already things like starstock where you can pseudo b/s/t cards like stocks, I'd imagine the platform is something similar? I'm a complete amateur at this but it seems like they're trying to turn super high end sports cards into an asset like gold or bitcoin? Not sure what the market demand is for something like this but curious to see it play out for sure.
 
I think its an interesting topic and I wouldn't be very surprised if this starts to grow in the hobby. The more cards get out of reach, the more demand there will be to be able to own a small part of one.

Back in the day when you owned a stock, you got a stock certificate with all the relevant information. I think it would be cool for a company working in fractional card ownership to offer (for an additional fee) the ability to order a card sized stock certificate. Give me the opportunity to 'own' a card with a picture of the card I own a fraction of and some other details (how much you own etc.) then that would be cool. It could act as a placeholder and a display piece.
 
steveottfan said:
I think its an interesting topic and I wouldn't be very surprised if this starts to grow in the hobby. The more cards get out of reach, the more demand there will be to be able to own a small part of one.

Back in the day when you owned a stock, you got a stock certificate with all the relevant information. I think it would be cool for a company working in fractional card ownership to offer (for an additional fee) the ability to order a card sized stock certificate. Give me the opportunity to 'own' a card with a picture of the card I own a fraction of and some other details (how much you own etc.) then that would be cool. It could act as a placeholder and a display piece.
Click to expand...

I mean, what they should do, is make the card like a jigsaw puzzle! Cut it up into pieces, and everyone gets the equivalent of how many pieces they bought! :laugh:
 
capsfan30 said:
I mean, what they should do, is make the card like a jigsaw puzzle! Cut it up into pieces, and everyone gets the equivalent of how many pieces they bought! :laugh:
Click to expand...

That becomes the "Inception" of sports cards.

We have cards of jerseys cut up into pieces, next we'll have cards of cut up cards to look for before we get to the cards of cut up cards of cut up cards to work with. #mindblown
 
IrbeFan4Life said:
That becomes the "Inception" of sports cards.

We have cards of jerseys cut up into pieces, next we'll have cards of cut up cards to look for before we get to the cards of cut up cards of cut up cards to work with. #mindblown
Click to expand...

Premium for the swatch of Gretzky's head!
 
Fred Bear said:
So, I've listened to a lot of the stuff on Sports Cards Live and other channels on fractional ownership, so I've been trying to do some research on my own as well to determine if this would be a reasonable investment or if it's just a cool thing for in your collection.

Full disclosure - I'm a skeptic. I like my cards and curating my at-home collection. I prefer full, tangible ownership. I won't own every card and I've come to accept that. I may put a valuable card in my safe, but I don't store anything away from home at this time.

I started researching the 1979 Topps Wayne Gretzky PSA 10 that Rally will be listing. As everyone knows, it recently sold at Heritage Auctions for $600,000 ($720,000 with buyer's premium). Rally intends to list 20,000 shares at $40/share for a market cap of $800,000.

Please understand, I realize that Rally needs to make something, totally get that, but... They were the top bidder at $600k ($720k). An increase in the value of 11% (or 33%) seems steep.

Here's the continuation of my logic/thought experiment: If the IPO sells out at $40/share and 53% of shareholders agreed to sell, what price would it have to sell at for shareholders to 'make' money? If I understand it correctly, if the card went back to auction, break even would have to sell for $800k + consignment fee (~20%) + applicable capital gains taxes (~20%?), so... around $1.2M ($1M + 20%)? [It's not clear to me if Rally is selling a 'business' or if they are paying capital gains on an investment at that point. It's also not clear if they use the $600k or $720k number for 'cost' purposes. I'm sure the US Government will want their share, though.]

Is the Gretzky Topps PSA 10 really worth almost 2x what was paid for it last month? What happens if another PSA 10 is graded?

Help me understand this, please.
Click to expand...

I think Rally is retaining more then 13%. I suspect that 800K is for 70/80 percent share of the card. Or, there will me some sort of MER equivalent. Early exit fees, etc. Silliness all around.

This scheme is clever but ridiculous. Unregulated, illiquid, and you don't even get to touch the card. Sorry but you don't get bragging rights for owning 1/20,000 of a card you will never see in person.

This is the 2021 version of the yahoos that were selling collectibles on the home shopping network in the 90s. A sign that we have reached peak card.
 
I have no idea how they are going to comply with all the potentially applicable securities laws - without being pedantic about this, as you'd expect there are lots and lots of rules that dictate how securities are offered, risks are disclosed to the public and more rules that dictate ongoing compliance obligations (like how the assets have to be custodied etc.). I don't know the rules in Canada, but I expect they may be similar to those in the U.S. in which case what these people are offering does not appear to be legal.

I would be very, very careful in participating in these platforms, particularly if, for example, they are deemed illegal by the Canadian government - in that circumstance, the government may seize the asset and/or you may get nothing back. This has happened many times in similar schemes in the US.

None of the investor protection mechanics which are in place for publicly traded securities look to be in place here.

Be very careful; caveat emptor!!
 
Here is the thing that happens in the CORP world often. Once a property or asset becomes of sizable value, those with vested interest will ensure that card or asset stays at the value it is at or push it higher. A good example of this is Donald Trump real estate empire. There was a time where he was so leveraged that it would have been catastrophic for the banks to call in his loans. They had to leave him where they were or risk a portfolio collapse. There are enough guys with money who will make sure that the card stay as high as they are
 
99goals said:
Here is the thing that happens in the CORP world often. Once a property or asset becomes of sizable value, those with vested interest will ensure that card or asset stays at the value it is at or push it higher. A good example of this is Donald Trump real estate empire. There was a time where he was so leveraged that it would have been catastrophic for the banks to call in his loans. They had to leave him where they were or risk a portfolio collapse. There are enough guys with money who will make sure that the card stay as high as they are
Click to expand...

Shouldn't market manipulation really be a big concern?

I was looking at the cards that are opening up for their trading window and, this week, a Bart Starr PSA 8 is opening up. The pop report on the Starr shows 83 PSA 8s, 3 PSA 9s, and no PSA 10s. Shares were originally sold at $1/share and sold out to just over 800 buyers. The card has been selling over the last year in the $7500-$8500 range with the last sale at $7700 at Mile High Auctions including the 20% buyer's premium. I think, in the context of your comment, market manipulation could be a real concern.

I'm interested to see how these first couple of cards trade this week.

As others have said, in terms of traditional investment, fractional ownership doesn't seem to make sense (still waiting to be convinced). The illiquidity of it is probably the biggest knock against it (makes it more like real estate than stock). It could still be an interesting conversation piece... 'Owning', even a part of, a PSA 10 Gretzky RC for $40 would be unique even if it never makes you $1,000,000...
 
Fred Bear said:
Shouldn't market manipulation really be a big concern?
Click to expand...

It seems easy to me if you had enough cohorts with the money and owned one of those cards already. Buy a lot of the shares in the Starr. Sell yours with friends "in on it" bidding it up. By virtue of hitting new highs, the fractionally-owned one would increase. Seems like it needs a lot of organization, but money makes people do strange things. And people with money do strange things.
 

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