Bull Case Bear Case: 1977 Topps Star Wars Series 1-5 Boxes
May 4, 2022
Welcome to the latest edition of Bull Case Bear Case. As always, the goal is to give investors a clear, balanced view of both sides of the coin.
1977 Topps Star Wars Series 1-5 Boxes
5/4 @ 12:00PM ET
Iconic franchise. Does it really need to be pointed out that Star Wars is about as iconic as entertainment franchises come? In the spirit of being thorough, we’ll do it anyway. Star Wars remains one of the most valuable multimedia franchises in existence, with a value estimated at $70 billion. Beyond the success at the box office, the franchise has generated over $42 billion in merchandise sales. This Topps set was essentially right there alongside the Kenner toys at the genesis of those merch sales, and it stands out amongst the most iconic, early entertainment card sets. The franchise continues to grow in notoriety and popularity, more frequently occupying the public consciousness today thanks to the ongoing production of series on Disney+, exploring different corners of the Star Wars universe. The continued stream of content has boosted engagement with existing fans, in addition to creating new ones in younger demographics. In the collectible realm, the expansion and strengthening of a fanbase tends to create demand for the earliest collectible products. To say the least, the franchise's collectibles have been appreciated by fractional investors to date. The average ROI of fractional Star Wars offerings through 4/30 is an eye-popping 200%.
Momentum in pop culture cards. Cards of the non-sports variety have enjoyed a strong 2021 and start to 2022. Since the beginning of 2021, the Card Ladder Entertainment index is up 1,094%; to date in 2022, the index is up 90.2% despite a ~15% pullback over the last month. That surge has been led in large part by Marvel Precious Metal Gems cards. Take, for example, a Red PMG Spider-Man card graded PSA 9. Back in October of 2020, that was a $450 card. It sold most recently in February for $78,000. A PSA 10 Skywalker #1, in a similar vein, sold for $6,878 in January of 2020. It most recently drew $55.3k in November. The introduction of ventures like Fanatics zerocool, which will focus on pop culture cards, speaks to an expectation of continued growth in the non-sports card space. To the extent entertainment cards continue to come into vogue for a larger audience - with both sports card collectors pursuing entertainment cards and franchise fans entering the card space - this set would stand to benefit. There may additionally be a catalyst on the horizon, as Goldin is set to sell a significant Star Wars collection, which includes a signed 1977 Topps set - that auction is opening for preview today (Wednesday 5/4).
Limited supply in strong condition. The key cards in the set (#s 1-8, the C-3PO error) have comfortably lower gem rates than the set average (8%). The most valuable Skywalker #1 card carries a gem rate of just 1%. Per Gemrate, the gem rate of the set has declined from 8.5% to 8.0% over the last nine months, with just under 20 new PSA 10s added in total (versus over 3,000 total submissions). Continuing to use the Skywalker card as an example, the combination of cards graded PSA 9 and PSA 10 account for just under 8% of that card's population and less than 100 cards in total. Or consider the PSA 10 "The Little Droid, Artoo Detoo" card (still blows my mind to see it written as anything but R2-D2). There are just 23 examples, and there have been two sales in the last month over $5,000, illustrating the strength of the market for strong, key copies. While there is assuredly no guarantee whatsoever that the boxes contain such strong examples, the continued suppression of well-graded supply would bode well for the prospects of unopened product.
Stagnant appetite. While pop culture and entertainment cards have experienced strength in 2022, this Star Wars set was somewhat early to the party, with an explosion in values in Spring 2021. For example, this very set of boxes sold at Goldin in June of 2021 for $24,600. In February, it sold to Rally for $22,800. In that same June 2021 auction, a standalone Series 1 box sold for $14,760, which was down from $19,200 a few months earlier in April 2021. Fast forward to today, and a Series 1 Box recently sold on eBay for $12,500,in line with a $12,600 February Goldin result, but much lower than a year earlier nonetheless. A Series 5 box sold in April 2021 for $2,520. On Monday, two sold for $2,040 and $1,920 respectively. The headline Skywalker card in PSA 8 and PSA 9 grades is similarly down over the same period. A PSA 8 sold 5/5/21 for $2,250; on Sunday, one sold for $1,400. Despite the rising tide in entertainment, 1977 Topps Star Wars seems to be heading in the wrong direction after an overly exuberant 2021, which casts doubt on the 2021-reminiscent valuation here. A sum of the parts of individual series BBCE-certified boxes currently trends towards the $21-23k range.
Few cards of material value. Outside of the PSA 10 realm - and we’ve covered just how seldom the key cards enter that realm - the number of cards commanding four figure values is limited. There is of course the Skywalker card, as well as the C-3PO Error card (for absurd reasons), Darth Vader #7, and Princess Leia #5 that have breached $1,000 on more than one occasion in grades under 10. Given the low probability of achieving a PSA 10 grade for key cards, the boxes may appear less attractive should a broader slate of non-Skywalker PSA 9s and 8s fail to achieve greater appeal and values. One could argue, however, that the lower values for those “rookie” cards of key characters leaves opportunity for appreciation, particularly given relatively low populations.
Poor fractional box performance. To date, unopened card product - comprised of sealed boxes and cases in the sports card and trading card categories - has fared very poorly on fractional markets. The average ROI of those offerings through 4/30 is -36%. That average has certainly been weighed down by the horrific performance of Pokémon, but even if you removed those offerings, the average would still be -12%. For whatever reason, whether due to lacking clarity in comps, BBCE credibility issues in 2022, or otherwise, these offerings have not clicked on the secondary market with fractional investors.
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