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Collecting Hockey Cards in 2021 (and beyond) - Part I
#1

Collecting Hockey Cards in 2021 (and beyond) - Part I
So... I've been thinking about posting my thoughts on this for quite a while and I'll make this post and ask for others input on whether or not they are willing to read and whether or not they are willing to dialogue on several of the topics facing the hobby moving forward.

I, like a lot of collectors, have a couple 'collections' - (1) for me, my PC cards, (2) for my kids, my 'investments' cards, and (3) for others, my sell/trade/flip cards. That 'breadth' has opened me up to looking at a lot of different things in the hobby, grading, NFTs, fractional ownership, investing, etc. etc. I've developed my opinions and what I enjoy and I feel like I've given several of these items a fair shake, but maybe others have a different perspective that has made something more enjoyable than I gave it credit for. Some of the topics may be controversial and, hopefully, the mods won't take issue with any mentions of potential competitors to our hosts.

I'll also apologize in advance for the length of some of the discussion and a couple of these topics, I may show some math that influenced my opinions... After not seeing too many posts over the last two weeks, I feel like we need to restart!

So, for this first post, I wanted to get people's opinions of 'fractional ownership'? There are several companies, Rally, Collectable, and, more recently, Dibbs, which will allow collectors/investors to purchase 'part' of a 'larger' collectable. Rally offers everything - sports cards, sports memorabilia, rare books, comics, art, and classic automobiles.

My first thought was - 'Neat. I could own part of a rare, high-grade Michael Jordan RC or Wayne Gretzky RC at a price which my budget allows.' So, I started looking into it more.

Each of the 'standard' fractional companies (Rally, Collectable, etc.) appear to follow all the rules for creating an 'investment' where they turn the collectable into a 'company' and then sell shares. I joined Rally and understand their set up the best. After the initial offering (IPO), they open up trading windows about every 3 months where you can either sell your shares or buy more. It still looked like a neat opportunity, so I kept 'looking' and investigating, especially since it looks like almost every asset they offer goes up in value!

That's when I started to do some math... Rally purchased a PSA 10 Topps Wayne Gretzky RC. They paid $720,000 at auction ($600,000 + $120,000 Buyer's Premium). They 'fractionalized' the Gretzky RC into 20,000 shares at $40 each. The IPO sold out before I was able to even get 1 share! The question is this - is it a 'good' investment? What would the card have to sell for in order to justify the price?

The fractionalized price was $800,000 (11% increase over purchase). If the card sold for $800,000, how much would investors get? If it sold at a big auction house where it was bought, 20% would go to the auction house, so $800,000 becomes $640,000. Then you have to pay taxes (estimate at ~20% of the $80,000 gain). That lowers the $640,000 to $624,000. Split it 20,000 ways and each shareholder gets - $31.20, a 22% loss to each shareholder... Wait, what? The card value went up 11%, yet shareholders each lose 22%.

So, how much does the card have to go up for shareholders to 'break-even'? Well, we know that the net has to be $800,000 after taxes and the auction house fees. After all that backwards math, the card has to sell for ~$1.1 Million for shareholders to break even.

So, is a card that literally just sold for $720,000 at one of the largest auction houses and wasn't bought by an individual collector immediately worth $1,100,000? I think it's debatable that it's not.

That leads me to 2 possible conclusions: (1) fractional ownership shouldn't be viewed as an 'investment', but rather as a talking piece or novelty item or (2) the fractional market really isn't linked to the collectables market, i.e. they purchased a collectable away from the hobby.

I personally tend to lean towards #2. If you want to invest, you really want to get into the 'IPO's as there is significant value in that 'first' purchase which you can flip when the trade window opens. After that, though, I struggle to see much value as the underlying card, in many cases, is trading at a price well above market. The value is internal to their platform - not as a greater part of the hobby. Will the two marry back together at some point or will the card shoot up quickly enough to reenter the hobby? That's for the speculators...

In parallel, the Dibbs app has also created a space where a card is fractionalized into non-fungible-tokens (NFTs) similar to a crypto-currency. I have not researched this fully, but it appears the same principles apply. Dibbs also charges deposit, transaction, and withdrawal fees which seems to indicate, you can't look at the hobby market, but rather the platform they have created to determine 'value'.

At the end of the day, I've decided fractional ownership isn't for me, but am curious to what others opinions are and if they have played with any of these apps or companies!

Thanks!
Current Project #1 - 2022-23 O-Pee-Chee Base Set (520/600)
Current Project #2 - 2022-23 O-Pee-Chee Playing Card Set (49/54)

Current Most Wanted - 1991-92 Upper Deck #587 Nicklas Lidstrom YG PSA 10 Incoming
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#2

RE: Collecting Hockey Cards in 2021 (and beyond) - Part I
Very well written and articulated , excellent read and honestly this is the first I've heard of fractionalized ownership , I would not touch it with a ten foot pole given the information provided...
Personally I don't even thinks it's good for the hobby.
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#3

RE: Collecting Hockey Cards in 2021 (and beyond) - Part I
I think the Rally idea is interesting. Just not right now while the market is up. When this boom period eventually busts, it may be something to re-visit.
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#4

RE: Collecting Hockey Cards in 2021 (and beyond) - Part I
Maybe these platforms could be more interesting during alternate times in the market. I think Rally is tough with their 90 day windows for trading.

I looked at Dibbs a bit more along with their fee structure... Assuming 'max' fees on deposit and withdrawl, your 'shares' have to go up 16% to break even on an initial drop and slightly less on regular trading. To make ~10%, the card has to go up by just over 25% (based on ~$1000 investment). If you minimize fees, it gets better, but you are still subject to ~6-9% in fees (based on ~$1000 investment). If you are flipping on COMC for cash (not buying PC cards), this is probably a little better and you are getting a curated card selection instead of picking and choosing yourself.
Current Project #1 - 2022-23 O-Pee-Chee Base Set (520/600)
Current Project #2 - 2022-23 O-Pee-Chee Playing Card Set (49/54)

Current Most Wanted - 1991-92 Upper Deck #587 Nicklas Lidstrom YG PSA 10 Incoming
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