There's Something Happening Here...
If you aren’t aware or haven’t kept up with what’s going on in the collectable market of late, especially with sports cards, then you will want to pay attention. Not only is the story of how we got here intriguing, with many parallels to investing in the equity markets, but also, if you have some old sports cards laying around in boxes in the attic or in a shoebox in your closet, then you may be in possession of some very valuable treasures.
To say the sports card collectable market has been hot would be an understatement. One indication that may have tipped you off as to how much in demand these pieces of cardboard with pictures on them are, might have been the news from earlier this year that retailers like Target and Wal-Mart decided to stop carrying and selling sports cards on their store shelves because customers were literally getting into fights over them inside the stores. As soon as new card releases become available in stores or online, they typically sell out within minutes. For any retailers that continue to carry cards in their stores, there have been reports of people that have tried to pay off the local stock clerk to find out when their delivery trucks will be showing up with boxes of cards to restock shelves so that they can get there first and buy out the stock.
While some may not understand what all the fuss is about over a simple piece of 2.5-inch by 3.5-inch cardboard (yes, technically there are other sizes, but this is the most common and I was going for an effect so work with me here), others are recognizing that there is a movement afoot. In the words of Buffalo Springfield, “there’s something happening here…”
Stop Children, What’s That Sound? Everybody Look What’s Going…Up?
Just how crazy has the sports card market been? While it’s easy to look at the value of specific cards and see how their value has changed over time, it’s more difficult to measure the market as a whole. However, there is an index of the top 100 sports cards that is produced and tracked by a leading firm in the industry and while it’s not perfect, it is a good representation of the market and that index has risen by over 900% since 2008, with most of those gains coming in just the past 12 to 24 months.
For years, the highest sales price for a sports card, and the first to hit $1 million, was the T206 Honus Wagner card, which sold for $1 million in 2000. However, recent sales make that seem like chump change.
So far, in 2021, we’ve seen the cards of professional athletes such as Honus Wagner, Mickey Mantle, LeBron James, Tom Brady, Mike Trout, Wayne Gretzky, Patrick Mahomes, Babe Ruth, Michael Jordan, Kobe Bryant, Luka Doncic, Reggie Jackson, Roberto Clemente, and Giannis Antetokounmpo all sell for over $1 million. In fact, there have now been at least 10 cards that have sold for in excess of $3 million.
Do you own a 1979 O-Pee-Chee Wayne Gretzky rookie card? In good condition, it could be worth a lot of money. One in pristine condition (graded a 10 by PSA – more on this later), sold earlier this year for $3.75 million.
Or what about a 2000 Playoff Contenders Tom Brady rookie card? An autographed version of this card sold in June for over $3 million.
Mickey Mantle cards have seemingly always been valuable, but a 1952 Topps Mickey Mantle card tops the cake (pun intended – sorry, it’s probably the first of many). One of these cards sold earlier this year for $5.2 million. Why the 1952 Topps card? While it’s not his rookie card (that distinction belongs to his 1951 Bowman card, which is valuable in its own right), it is the first year that Topps entered the sports card market and it is a “high number” card (cards numbered 311 to 407 in the set). This is important because fewer high number cards were printed when compared to the lower numbered cards in the set. Also, several high number cards from this set were famously (or maybe infamously) dumped in the ocean.
As the story goes, after the release of the 1952 high number series didn’t sell as well as the first series of low number cards, Sy Berger from Topps (more on him later) was left with cases of cards.
He tried to pawn them off at carnivals, but after not being able to give them away, he decided to get rid of them. To do so, he found a friend with a garbage scow and they loaded trucks worth of cases on the barge. Then they hauled the barge out somewhere off the New Jersey shore and dumped them in the Atlantic Ocean. To this day, scuba divers can be found scouring the ocean floor off the Jersey shore in search of these valuable cards (ok, I may have made that last part up).
Record prices continue to get broken with each passing auction. The highest price now? It still belongs to an Honus Wagner card. The famous T206 card that could be found in packs of tobacco from 1909 to 1911, sold at auction last month for an eye popping $6.6 million!
The Mona Lisa of Baseball Cards…
Why is the T206 Honus Wagner card the most valuable? Though Honus Wagner may be less renowned than baseball icons like Babe Ruth and Mickey Mantle, he was one of the greatest all around players. Wagner spent most of his career playing shortstop for the Pittsburgh Pirates. He put together 17 consecutive seasons with a batting average of .300 or better, he won 8 batting titles in 21 seasons and he ranks among the top 10 on baseball's all-time hits list with 3,420. When it came time for the first Baseball Hall of Fame vote in 1936, Wagner became one of the first 5 players inducted and tied Babe Ruth for the second most votes (215), second only to Ty Cobb’s 222 votes.
The scarcity of his T206 card is one of the reasons it has become so valuable. Not many are known to exist. There are a few different theories as to why this Honus Wagner card is so scarce, but the most popular and romantic theory has been put forward by Wagner's family and the Metropolitan Museum of Art in New York City (which has a T206 Wagner card in its collection). They say that Wagner didn't want to promote smoking tobacco to children and asked the company to pull his card from production.
Others are skeptical of that theory and suggest it had more to do with the fact that smoking cigarettes was considered “low class” at the time. Whatever the truth, the American Tobacco Company stopped producing Wagner's card and the rest, as they say, is history.
America’s Favorite Pastime…
Google “America’s Favorite Pastime” and the first word that comes up will be “Baseball” (or at least it did for me so if you are Googling it now and that’s not what you get or you see a story that says baseball is no longer America’s favorite pastime, then clearly there is something wrong with your browser – insert comedic rimshot here please). Following is an excerpt from the website for the Baseball Hall of Fame…
"We play it as kids, we watch it and listen to it as adults, and we pass down our love of the Game through generations. Baseball is an American family tradition.
This Game is closely tied to us in a very personal way, but what you may not realize is how much it is also tied to history. Often referred to as America's National Pastime, baseball has had a very active role in the shaping of this nation.
From the Civil War to Civil Rights and all points in between and beyond, the game of baseball supports and reflects many aspects of American life, from culture to economics and technological advances. It inspires movements, instills pride and even heals cities.
This story is told at the National Baseball Hall of Fame and Museum, where the plaques and artifacts all have something to say about the special place baseball holds in the hearts of Americans."
One person who knew the significance of baseball to America was a gentleman by the name of Jefferson Burdick, who is known as the “Father of Card Collecting”. Burdick ultimately donated his enormous collection to the New York Metropolitan Museum of Art where it can still be seen today. In 1960, a few years before his passing, Burdick wrote that a card collection is,
“a magic carpet that takes you away from work-a-day cares to havens of relaxing quietude where you can relive the pleasures and adventures of a past day – brought to life in vivid picture and prose.”
And who said you can’t be romantic about baseball!
You can Observe a Lot Just by Watching…
That line was attributed to Lawrence Peter Berra, perhaps better known as Yogi Berra. Yogi was a legendary, professional baseball player who spent most of his career with New York Yankees. Many baseball fans may not realize that before his baseball career began, he served in the U.S. Navy as a gunner’s mate in the Normandy landings during World War II where he earned a Purple Heart. He was inducted into the Baseball Hall of Fame in 1972 and passed away on September 22, 2015.
He was famous for his quotes, known as “Yogi-isms”, which are essentially colloquial expressions that lack logic (haha). Examples of these include…
“When you come to a fork in the road, take it”
“It ain’t over ‘till it’s over”
“No one goes there nowadays, it’s too crowded”
“It’s déjà vu all over again”
“We made too many wrong mistakes”
Who knows if Yogi actually said many of the quotes that are attributed to him. As he once said, “I never said most of the things I said.”
Not sure how any of this is a segue into the next section, but seemed like a good excuse to work some Yogi-isms into the piece. Moving on…
Sports cards were first produced in the late 1800s by tobacco companies and were found either on, or within, packs of cigarettes. Before long, candy companies such as the American Caramel Company also got into the mix. Then, in 1928, Walter Diemer, a chemist for the Fleer Company, was trying to make a new rubber product and instead, a marketable bubble gum resulted. It was called Dubble Bubble and was an instant success. Enter the Goudey Gum Company. Goudey combined bubble gum with sports cards in packs and first started selling them to the public in 1933. To this day, the 1933 Goudey baseball cards are some of the most sought-after cards by avid collectors – it probably didn’t hurt that the legendary Babe Ruth, was featured in the set.
Goudey wasn’t the only game in town (pun intended – again). Jacob Bowman founded Gum, Inc. in 1927 and began producing sports cards in the 1930s. They produced cards that were known as the “Play Ball” sets from 1939 to 1941. However, production was halted due to wartime paper rations and so the company didn’t return to making sports cards until 1948, when the renamed Bowman Gum Company released its first American Football set and a highly popular Baseball card set.
That same year, another confectionery company, Leaf International, issued its first set of baseball cards, which was the first color set issued post World War II (the 1948 Bowman baseball cards were black and white). The fact that this was the first color set after the war is fitting given that Jackie Robinson broke the “color barrier” in 1947, becoming the first African American baseball player in Major League Baseball (he played for the Brooklyn Dodgers). That Leaf set contains some of the most popular and highly valued rookie cards of iconic players such as Stan Musial, the aforementioned Jackie Robinson, and Leroy “Satchel” Paige.
Change is the Only Constant…
A look back at the history of the various sports card manufacturers is fascinating and there have been none bigger in stature than Topps.
As the story goes, back in 1938, four brothers got together to revive a family’s struggling tobacco distribution business and created Topps Chewing Gum, Inc. The name came from a small Chattanooga candy company that they purchased and fit nicely with their goal to become “tops” in their field (there’s that pun again).
Fast forward to 1951 and Topps decided to get into the baseball card market by releasing 52 cards in separate sets (or “decks”) designed to let kids play a game of card baseball. Then, a 28-year old war veteran by the name of Sy Berger designed Topps first annual baseball card set that was released in 1952 and over the course of his more than 50-year career with Topps, Sy became regarded as the “Father of modern baseball cards”. See, the hobby can be forgiving and overlook the fact that he dumped cases of the 1952 cards into the Atlantic Ocean (insert another comedic rim shot here please).
In 1956, Topps purchased Bowman for $200,000, which gave them a monopoly in the baseball card industry and made them a permanent fixture and one of the most iconic brands in the sports card industry for years to come. In 1989, Topps resurrected the Bowman brand name, which today, has become known for producing the “1st rookie card” of professional baseball players.
Now, remember the earlier mention of the Fleer Company? Well, they too wanted in the sports card market but given the exclusive contracts held by Topps, Fleer essentially had to sign contracts with players no longer active in Major League Baseball. This resulted in a few specialty commemorative sets, such as the 1959 Ted Williams set and the 1960 and 1961 baseball sets that featured “Baseball Greats” from years past. However, Fleer eventually got pushed out of the baseball card market (although they did produce football and basketball cards).
In 1975, after several complaints, Fleer brought an antitrust suit against Topps and the MLB. While the ensuing legal battles could fill a few libraries, the end result was that by 1981, Fleer and another company called, Donruss, were ultimately able to obtain licenses from the MLB to produce baseball cards (although ironically enough, Fleer’s most iconic sports card set is arguably their 1986 basketball set that features the rookie card of Michael Jordan). In 1992, Fleer was purchased by Marvel Entertainment Group (yes, that Marvel of the Avengers fame). Marvel also purchased SkyBox before going bankrupt in 1996. They exited bankruptcy in 1998 and ultimately, Upper Deck bought the rights to the Fleer name.
For its part, Donruss was no stranger to trading cards. Donald and Russell Weiner became owners of the Thomas Weiner Company of Memphis, Tennessee, which started as a confectionery company. They used a combination of their first names (Donald and Russell) to rename the firm, Donruss and in 1969, sold the company to General Mills. Prior to the production of baseball cards in 1981, Donruss produced entertainment themed cards in the 1960s and 1970s and produced a series of racing cards in 1965. In 1983, General Mills sold the company to a Finnish firm who subsequently (in 1996) sold the company to Pinnacle Brands. Pinnacle Brands was born out of a couple of companies in the late 1980s and early 1990s and ultimately produced the Score brand of sports cards. Pinnacle also ended up filing for bankruptcy and eventually sold to a company called Playoff, Inc., which would become Donruss Playoff LP and later be acquired by Panini (whew, that was exhausting!).
Panini is a delicious Italian sandwich. Sorry, got my notes mixed up…Panini, is an Italian company headquartered in Modena (not to be confused with the COVID vaccine maker Moderna). The company was founded by a family of the same name in 1961. It originally produced books, magazines, trading cards, and other items. In the 1960s, the company became well known for its soccer cards (in sticker form). In January of 2009, the NBA announced they were kicking Topps and Upper Deck to the curb (not literally) and granting an exclusive license to Panini to produce NBA cards. Panini then acquired Donruss Playoff LP (we’ve now come full circle) and inherited that company’s NFL licenses. This cemented Panini as a major player in the U.S. sports card market. After purchasing Donruss, they formed a new subsidiary called Panini America, which operates out of Irving, Texas.
In Sept. 2009, Panini signed a deal with Kobe Bryant to become the company’s trading card ambassador (and to provide autographs and memorabilia exclusively to Panini). Bryant previously had a deal with Upper Deck, but had a special connection to Panini as he lived in Italy as a child (between the ages of 6 and 13) while his father played for several Italian basketball teams after a career in the NBA (from 1975 to 1983). Of course, the Bryant’s moved back to the U.S. and Kobe became one of the greatest NBA players of all time prior to his tragic death in a helicopter crash last year.
Finally, there is Upper Deck. Upper Deck was founded in 1988 and started producing baseball cards and eventually added hockey, football, and basketball cards to their lineup making them the first trading card company in 10 years (at the time) to be licensed by all four leagues. This quickly established them as a rival to Topps. However, they ultimately were not able to renew their license agreements with MLB and the NFL and so now largely produce Hockey cards. In addition to purchasing Fleer (as previously noted), they also bought, in 2007, the other major hockey card producer, which was a Canadian company called O-Pee-Chee (Eh?!).
While baseball may be where the sports card hobby got its start, many other sports such as basketball and football have become equally, if not more, popular and that has translated to the growing value of trading cards in those sports as well. We’ve also seen increased interest in trading cards associated with hockey, soccer, golf, tennis, boxing, the Olympics, and more. Non-sport trading cards have also become very popular, particularly TCG (Trading Card Game) cards such as Pokémon, Magic: The Gathering, and Yu-Gi-Oh! as well as cards from old movies and comics such as Star Wars, Superman, and Marvel characters.
What is causing the increased attention and sudden spike in prices? Many theories abound, but it’s probably the result of a mix of factors.
For starters, when COVID-19 hit last year and the country shut down, many people suddenly found themselves with a lot of time on their hands and for some, that extra time was funneled into the sports card hobby. Stimulus money also certainly helped grease the wheels as some people ended up with excess funds that ultimately found their way into collectibles, and more specifically, sports cards. Demographics have played a role as many 40 and 50-year-olds that collected sports cards as kids, now have kids of their own that they are introducing to the hobby in addition to reigniting their own interest in a favorite pastime.
Story telling has always played a role and so many attribute increased interest in collecting sports cards, especially basketball cards, to the documentary series, “The Last Dance”, which was released in 2020 and chronicled Michael Jordan’s last season with the Chicago Bulls.
The popularity of fantasy sports leagues and legalization of sports betting has also likely played a role and there are many other confluences that have led to the increased interest in the hobby. A couple of those likely include innovation in technology and the lure of the big find (that’s a not too subtle foreshadow).
Treasure Hunt for Cardboard Gold…
In the movie, National Treasure, Benjamin Franklin Gates (played by Nicolas Cage) is a historian and amateur cryptologist that is in search of a lost treasure containing many valuable items, including historical artifacts.
Similarly, over the years, tales of finding sports cards that are worth a small fortune in the attics of homes have become the stuff of legend as stories of big sports card finds have become part of American folklore.
In 1986, there was a discovery of a haul of 1952 Topps cards (remember those?). As the story goes, Alan Rosen, a well-known collector and card dealer was lounging around watching TV one Saturday afternoon when the phone rang. On the other end of the call was a friend who said he recently talked with a truck driver who said he had several baseball cards for sale. Having heard similar stories before, Rosen was skeptical but jotted down the man’s contact information. After several phone conversations with the truck driver, Rosen decided to meet with him to see what he had. Long story short, as it turned out, the truck driver had a case (one that apparently didn’t get dumped in the ocean) of highly sought after and valuable 1952 Topps baseball cards (including multiple Mickey Mantles) that sat in his dad’s attic for decades. All told, they ended up selling for about a half a million dollars. Side note, I need to find a friend that will call me one Saturday afternoon with the treasure find of a lifetime!
In 2012, after a family member passed away in Defiance, Ohio, relatives were going through the attic of their late grandfather’s home and stumbled upon a green box with metal clips that contained a trove of vintage baseball cards from 1910 (including several cards of Ty Cobb). These cards ended up being worth millions and this became known as “The Black Swamp” find (a moniker from the merciless terrain that surrounded Ohio’s Fort Defiance in the late 1700s and whose remnants survive at the outskirts of Defiance, Ohio).
Are you in your attic looking for cards yet? If not, maybe a couple of additional tales will entice you to dig out those old boxes with stuff from your childhood that you didn’t want, but your parents gave you anyway (be sure to thank them if you find any sports cards).
In 2016, there was what became known as “The Lucky 7” find. In a rural southern town, family members were combing through the possessions of their great grandparents and came across a torn paper bag that initially looked like trash. They were going to simply discard it…good thing they didn’t. One family member decided to sift through the contents before throwing it away and discovered seven (thus the name, “The Lucky 7”) T206 Ty Cobb cards with the coveted Ty Cobb back. The backs of T206 cards displayed the names of the tobacco brands of the packs or tins in which they were found. Examples include Piedmont, Sweet Caporal, Old Mill, Lenox, Sovereign, and several others. In addition to being a baseball player, Ty Cobb was also a businessman and at one point, tried to start a tobacco company of his own. The venture didn’t do well and was quickly discontinued. The result is that the Ty Cobb T206 cards with the Ty Cobb backs are some of the most scarce of the T206 cards.
In 2017, a 1948 Bowman baseball card box was discovered with 19 unopened packs. The box was stored in a Stroh’s beer case that appeared to be as old as the cards.
That brings us to 2020…
The Uncle Jimmy Collection…
Come and listen to my story about a man named Jed. A poor mountaineer, barely kept his family fed. And then one day he was shootin’ at some food, and up through the ground come a bubblin’ crude. Oil that is, black gold, Texas tea.
Many may recognize those lyrics from a song called The Ballad of Jed Clampett, which was the theme song of the 1960s TV sitcom, The Beverly Hillbillies. Today, that tale could be re-told and reimagined based on the discovery of sports cards where a big find can be as exciting (and as profitable) as the discovery of oil.
Renewed interest in the hobby over the past year or so may very well be attributed to one of those recent discoveries. In March of last year (2020), James Micioni passed away at the age of 97. He lived a modest life as a factory worker and high school janitor. He didn’t have kids and was never married, but he did have a number of nieces and nephews. “Uncle Jimmy” as he was known by his seven nieces and nephews, was an avid collector of baseball cards. His family knew he liked to collect cards, but didn’t realize just how large and valuable of a collection he had. One of his nephews told Sports Collectors Digest, “We always knew he had Babe Ruth and it was always in the attic, but we were never allowed in the attic.” Days after his passing, his nieces and nephews went into the attic and started sifting through the items and began to realize just how significant the collection was. Several 1933 Goudey Babe Ruth cards (remember those?) were discovered and ultimately, thousands of vintage baseball cards were found in remarkable condition. These cards were put to auction last year in what became known as, “The Uncle Jimmy Collection”. In the aggregate, the collection sold for several million dollars.
Sometimes real-life stories are better than anything you can make up. Now, pardon me while I go call my Uncle…
The Modernization of an Industry…
Another factor that has likely contributed to the increased popularity of sports cards and collecting in general is advancements in technology. Historically, there have been some significant impediments to participation in the hobby. These include, but are not limited to, access, friction costs, and fraud.
Before the advent of the internet, it was difficult to access the full scope of the market. The market was local. You bought cards at your local card shop or retail store and then you sold them to, or traded with, your friends. If you were lucky, you lived in or near an area that may have a card show or an auction that you could attend. However, if you weren’t physically able to attend a card show or an auction, you didn’t get the same opportunities to buy or sell cards.
Friction costs, which are defined as the total direct and indirect costs associated with the execution of a transaction, have also been a problem. Unless you were selling or trading cards with friends, the cost to buy or sell a card at a show or an auction could run as high as 30% to 40% or more of the value of the card.
Another issue, unfortunately, is fraud. It seems like anything that has a lot of money at stake, invites unscrupulous characters into the mix and the sports card market is no different. There have been too many instances of “fakes” or counterfeit cards floating around and too many stories of fraudulent buyers and sellers that renege on transactions or don’t fulfill their end of the agreement. All of this makes people wary and skeptical of who and what they can trust.
Today, many companies are addressing these issues and concerns. While not totally solved for, many of these impediments are being significantly addressed with innovation in technology. This, in turn, is expanding the reach of the market. What may have once been a largely domestic and local market, is now quickly becoming a global phenomenon.
A Broken Heart, The Social Network, and The Butterfly Effect…
In October of 2003, a 19-year old Harvard student named Mark Zuckerberg got dumped by his girlfriend and, as often happens when one gets their heart broken by the love of their life (yes, that was said with tongue in cheek), that set off a series of events that led to the creation of two movies – The Social Network and The Butterfly Effect. Oh, wait, got my notes out of order again…that set off a series of events that led to the creation of what we know today as Facebook and, more generally, social media – and then those led to the creation of the movies or, well, maybe the movies are irrelevant, but you get the point.
It is estimated that nearly 4.5 billion people across the globe are actively using social media (in case you are wondering, the global population is estimated to be about 7.9 billion). Although certainly up for debate, it’s probably safe to say given the enormous usage, that fewer things have had as much impact on our lives over the past several years (good and bad) than social media.
The impact of social media on the sports card world has been no different. It has helped the hobby to explode. There are now collectable groups on Facebook and Instagram and Twitter and many other social platforms for just about any particular interest you may have. There are also podcasts and YouTube channels and the number of marketplaces and auction houses that now offer online access for the buying and selling of cards has grown significantly. There are now even ways to own fractional interests in cards and to trade those similar to how you would trade shares of stocks.
Break a Leg…Or a Box of Cards…
The combination of America’s pastime, a treasure hunt, social media, and throw in a hint of gambling, has all led to the growing popularity of something referred to as “Breaks”.
Breaks (or Breaking) is where one person owns a box or packs of cards and then opens those boxes or packs of cards and provides a play by play of what cards are found – and all of this is streamed live on social media channels (Facebook, YouTube, etc.). You’d be amazed at how many people tune in to watch these breaks – they’ve become a form of entertainment for some and for others, there is a vested interest. You see, breaking is big business.
In a break, the owner of the box of cards sells “spots” in the break to individuals that might be looking for certain cards, but maybe don’t want to buy, or can’t afford, the whole box. You see, certain boxes of cards have become expensive, like to the tune of thousands of dollars, and some have price tags in excess of $10,000 per box. So rather than drop thousands of dollars on a box, a collector might spend more like $100 to get a spot in a break (the amount varies based on the box and type of break). What does that get them? It depends on the type of break. It could get them all of the cards in the box from players on a particular team like, say, the Yankees (referred to as a team break). Or it could get them all cards from one of the packs in the box (a pack break). There are many different types of breaks – probably only limited by the creativity of the breakers. What happens if someone buys a spot in a team break and there aren’t any cards in the box from players on the team they purchased? Well, that’s where the gambling part comes in – it’s tough luck – go get ‘em next time…or don’t – it’s your money.
It’s tough to say exactly when breaking first started, but it can be traced back to as early as 2006. Regardless of when it started, one thing is for sure, its popularity has grown exponentially. Today, some of the leading breakers have had their streams viewed more than 60 million times and often have thousands watching the live event.
Some may not understand it, but for others, it has become a sort of community. In fact, some have described it like the popular TV sitcom Cheers – “Norm!” – it’s a fun place to go to where everybody knows your name.
I Hate Losing More Than I Love Winning…
In the movie Moneyball, which is based on an account of the Oakland Athletics baseball team’s 2002 season and their general manager, Billy Beane’s, attempt to assemble a winning team, Beane (played by Brad Pitt) says, “I hate losing more than I love winning.”
In the investment world, this concept is known as “loss aversion”.
It’s a powerful concept and although not always a bad thing, it’s often viewed as a reason why investors behave irrationally and make bad decisions.
Well, whatever the reasons for the increased interest in the sports card hobby, some interesting opportunities have been created and investors have taken notice and don’t seem to have any sense of loss aversion toward the space.
Many large investment firms and prominent business executives have been involved, or recently got involved, in the business. This includes the likes of Blackstone, Michael Eisner (former Disney CEO), Steven Cohen (hedge fund manager and owner of the New York Mets), Roc Nation (founded by Shawn “Jay Z” Carter), Michael Rubin (founder of Fanatics), Daniel Sundheim (minority owner of the NBA’s Charlotte Hornets) and other firms that count people like Mark Cuban, Mark Wahlberg, Bono, Kevin Durant, LeBron James, Andre Iguodala and others as investors/clients. More on this later.
The Million Dollar Question…
Ok, so by now you have probably (hopefully) pulled that box down from the attic and that shoebox out from the closet and are sifting through your cards to see what you have. But how do you know what your card or your collection is worth? There are actually a number of websites and apps that can assist collectors and investors in valuing their cards. However, one of the first places to start is often with grading and authentication. While not all cards need to go through this process, virtually all of the highest selling cards have been authenticated and their condition has been graded by one of the leading sports cards grading and authentication companies.
The business of grading and authenticating sports cards has become a microcosm of the increased attention to the collectible industry as a whole. Up until last year, there were three major authentication and grading companies for sports cards. These included PSA (Professional Sports Authenticators – which is the largest of the group), BGS (Beckett Grading Services) and SGC (Sportscard Guaranty Corporation). Apparently, to be a grading company, it’s a requirement to have a 3-letter acronym, but I digress.
These companies grade the condition of cards on a scale from 1 to 10, with 1 being a card in very poor condition and 10 being a card that is “pristine” or “flawless” or in “mint condition”. The better the condition of the card, the higher the grade and the higher the grade, the higher the value. The difference can be significant.
For example, if you have a 1980 Topps Rickey Henderson rookie card and it grades an 8 from PSA, it is currently worth about $300 whereas if it grades a 9, it is worth roughly $2,000 and if that same card grades a 10, it is currently worth well over $100,000.
A lot of that value discrepancy between the grades is based on scarcity (the number of cards available and that have achieved those grades). Or put another way, supply and demand (catching on to the parallels between economics, investing, and collecting sports cards?). Using the above example, there are only 25 1980 Topps Rickey Henderson rookie cards that have achieved a grade of 10 from PSA, whereas there are over 2,000 that have received a 9 grade and over 10,000 that have been graded an 8.
For older cards (often referred to as “vintage”), it can be difficult to find them in good condition and so there are very few cards available in higher grades. That T206 Honus Wagner that sold for $6.6 million? It received a grade of 3 from SGC. For newer, or what are referred to as “modern” or “ultra-modern” cards, it is much easier to find them in mint condition so generally speaking, only the higher grades (9 or 10) will likely have any significant value.
Have a 2017 Panini Patrick Mahomes rookie card that grades 10 from PSA? In the base variation, it’s currently worth about $800 and there are hundreds, if not thousands of them, but as you may recall from the beginning of this piece, a PSA 10 graded 1979 O-Pee-Chee Wayne Gretzky rookie card recently sold at auction for $3.75 million. As of this writing, only 2 of these cards have achieved a grade of 10 from PSA.
All three of these grading companies experienced such a significant increase in demand in 2020 that they all had to stop taking submissions for a period of time (PSA and BGS remain largely closed to new submissions). Additionally, in order to moderate the demand for their services and balance their capacity with that demand, they all have either increased prices or increased their turnaround times or both.
Turnaround times at companies like PSA and BGS got so bad, that many collectors have had to wait for more than a year to get their cards back after they submitted them to be authenticated and graded. Prices have increased so much that it no longer makes sense to get lower value cards graded. These companies are working to add capacity so they can reduce turnaround times and restore pricing to more reasonable levels, but it will likely be several more months before that is fully achieved.
All of this has attracted the attention of investors in the space. The parent company of PSA, is Collectors Universe, which was a publicly traded company (on the NASDAQ) until late last year, when a group of investors led by Nat Turner, Cohen Private Ventures (Steven Cohen), and D1 Capital Partners (Dan Sundheim) bought the firm for approximately $700 million. You may recognize those last two names as they were two of the hedge funds that got caught up in the Reddit fueled GameStop short squeeze. They have since recovered most of their losses from that fiasco, but that’s another story for another time.
Since acquiring Collectors Universe (and PSA), that investor group has gone on a mini buying spree. First, they acquired Genamint, which is a software company that will help PSA scale and improve their processes. Next, they purchased Goldin Auctions, which is one of the leading sports card auction houses (having sold $200 million worth of trading cards and memorabilia in the past six months). Something tells us that they probably aren’t done acquiring companies in the space.
Not to be outdone, the investment firm Blackstone entered the space by acquiring a majority stake in Certified Collectibles Group, or CCG that reportedly valued the company at more than $500 million. CCG is one of the leading authenticators and graders of comic books, but recently entered the same market in sports cards with the launch of a new division called Certified Sports Guaranty (or CSG – remember, the apparent 3-letter acronym requirement). Additional investors that were part of this deal include Michael Rubin (founder of Fanatics), NBA player Andre Iguodala, Daryl Morey (President of Basketball Operations for the Philadelphia 76ers), Main Street Advisors (who works with the likes of Bono, LeBron James, and many other professional athletes, musicians and celebrities), and Roc Nation (of Shawn Carter fame, but you may better recognize Shawn Carter by his professional rapper name of “Jay Z” – and who says you aren’t hip to pop culture).
Savvy entrepreneurs have also jumped on the opportunity that was created by the closing (or limiting) of card submissions from the more established grading companies and this has led to many new entrants into the space. One particularly notable firm that is local to the southeast is Hybrid Grading Approach (or HGA – again, 3-letter acronym), which is based in Knoxville, TN and launched their grading service earlier this year. In just a few months’ time, they’ve already graded over 100,000 trading cards. By comparison, and to give you an idea of the size of the market, in 2020, PSA received over 7.5 million collectibles for certification. During the first 3 months of 2021, they received over 1 million items each month, literally over-flowing the local post office near their headquarters, before making the decision to shut down and limit submissions.
The Future Ain’t What It Used To Be (another Yogi-ism)…
Change, disruption and rapid growth hasn’t been exclusive to the authentication and grading firms. As previously detailed, the sports card manufacturing space has been equally intriguing. Today, there are three main sports card manufacturers. They are Topps, Panini, and Upper Deck (refer to earlier in this piece for a complete and exhausting recap of how these firms came to be). There are a handful of others, but the aforementioned three have long controlled the majority of the market as they have had the trading card rights to the NFL, NBA, MLB, NHL, and MLS for several years. However, that too, is about to change.
Both Topps and Panini were set to come public this year via SPAC deals. SPAC stands for Special Purpose Acquisition Company (we love our acronyms) and without getting into all of the details, essentially SPACs offer private companies a quicker and less costly way to go public.
Former professional baseball player, Alex Rodriguez, formed a SPAC called Slam Corp. that was in merger talks with Panini, which would’ve valued the company at more than $3 billion. We’ll get to why we said “would’ve” in just a bit.
Topps was also set to come public through a SPAC deal of its own. Topps, whose Chairman is now former Disney CEO, Michael Eisner, had a deal with Mudrick Capital Acquisition Corporation II that would’ve valued the company at over $1 billion. To add mystery and intrigue to this story, remember the previous mention of a couple of hedge funds involved in the acquisition of PSA that were on the wrong side of the GameStop short squeeze? Well, this SPAC is led by Jason Mudrick, who runs Mudrick Capital, which is a hedge fund that gained attention earlier this year when it made a small fortune on equity and option investments in AMC and GameStop after the Reddit fueled rally sent those stocks “to the moon” (sorry, but the pop culture reference fit too perfectly right there). Something tells us Cohen and Sundheim didn’t shed a tear for their cohort, Mudrick, when hearing about the news we are about to share (and the reason why we used past tense in describing this deal).
As you probably guessed given our not so subtle foreshadowing, both the Panini and Topps SPAC deals recently fell through when it was reported that Fanatics (an online retailer of sports merchandise) reached a deal with the NFL, NBA, and MLB to secure the exclusive rights to trading cards for all three leagues. The deal is reported to be for 20 years beginning in 2026 (when the current licensing deals with Topps and Panini apparently expire) and includes the player associations of the leagues. It was reported that Fanatics will start a new firm that will oversee these ventures and this new entity will be led by Josh Luber, who is probably best known as the co-founder of StockX (an online marketplace for the buying and selling of shoes, sports cards, and other collectibles).
If the reports are true, this would end a more than 70-year partnership between MLB and Topps. Many long-time (aka, old school) participants in the hobby would like to see Topps (and Panini) somehow maintain a role and their brand names in the space, but no word yet from Fanatics on whether it will try to acquire either (or both) of those firms or whether they will try to reach some sort of deal with them on the rights to their brand names. In fact, until recently, there had been no word from Fanatics about any of this.
Michael Rubin, Executive Chairman of Fanatics, recently went on CNBC and confirmed that the reports of their entry into the sports card space are true. Fanatics has also been busy raising capital of late. They have raised capital a number of times over the past year or so, selling equity in the company to the likes of Fidelity Investments, Franklin Templeton, Neuberger Berman, and others such as Jay Z (there he is again). Of note, the NFL and MLB both have equity stakes in Fanatics, which one can only speculate to have certainly played no small part in the blockbuster decision to give exclusive trading card rights to the firm and stripping them away from Topps, an iconic and nostalgic company that, as we’ve chronicled herein, has been producing league licensed cards for decades. In fact, the trading card deal supposedly offered additional equity ownership in Fanatics to the leagues and to the player associations of those leagues. Fanatics is now apparently planning an IPO (initial public offering – again, acronyms) that would value the firm at around $18 billion.
That’s A Wrap…
While the focus on this piece has been on sports cards, it’s worth noting that several other collectibles (such as comic books, video games, memorabilia, etc.) have seen similar surges in activity and prices. While I’d love to dive into those as well, the hands on the clock and the length of this piece tells me it’s time to wrap up.
So, will the current spike in prices hold and move higher in the coming years or will the market crash and go dormant much like it did after the boom in the late 80s and early 90s (are those our only choices)? That’s anyone’s guess and if nothing else, the market will certainly be subject to the ebbs and flows of economic activity and discretionary income. However, with projections for the sports card trading business to reach nearly $100 billion by 2027 and so many investors putting capital to work in the space with a long-term investment horizon, it would appear that while the recent surge of activity may abate somewhat, the industry seems to be on good footing for a number of years to come.
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