Bull Case Bear Case: Gary Vee VeeFriends Sharing Squirrel Original Sketch
April 15, 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. Prepare to tackle the week with confidence!
Gary Vee: Original VeeFriends Sketch (Sharing Squirrel)
4/15 @ 12:00 PM ET
Significant NFT brand strength. Put simply, Gary Vee is effectively synonymous with NFTs. He has been a vocal, visible, and passionate advocate for the space, and he is consequently viewed as an industry tastemaker. His own project has been highly successful. Per CryptoSlam, VeeFriends, which launched just under a year ago, ranks 9th all-time in total sales volume at nearly $530 million. The VeeFriends Discord features nearly 344k members. These are astounding numbers that illustrate the incredible reach that Gary Vee and the project have in the NFT space. The asset here is the original sketch of one of the project’s characters, Sharing Squirrel. Five such sketches corresponding with other characters sold at Christie’s in October for an average price of $252,500, with a high price of $412,500 for “Empathetic Elephant” and a low price of $162,500 for “Diamond Hands Hen”. The Elephant outsold works from names like Condo, Warhol, and De Kooning in the same auction. Worth noting: this asset has been discussed in that massive VeeFriends discord, with early access provided to new Rally members. Should those newcomers comprise a significant portion of the shareholder base, they may be more likely to hold long-term than the typical fractional participant.
Crossover appeal. The potential expansion of reach for VeeFriends IP was on display recently with the first product launch from zerocool. Zerocool is a new Fanatics trading card company focused on pop culture, and for their debut offering, the zerocool team chose VeeFriends as the ultimate collaborator. Using zerocool’s Blind Dutch Auction format, 800 boxes were sold at a clearing price of $2,150. Once the boxes hit resale markets, the value sharply ascended to a peak of just under $15k before stabilizing at levels that are still multiples of the retail auction result. Importantly, this product bridges a chasm between the NFT community and card collectors, bringing participants from each further into the other category…all of which stands to benefit the breadth of VeeFriends influence and awareness. A bullish investor will hope it’s the first of many such collaborations that further broaden VeeFriends’ reach and bolster the value of the IP.
Precedent for long-term success. Gary Vee has often mentioned that he’s trying to build the next Disney with the VeeFriends project. If the ultimate aim is to build a globally-beloved multimedia franchise, then certainly that’s an ambitious goal. The success of that pursuit will assuredly be part of a bullish investor’s thesis, and if it is indeed a success, there is analogous precedent for what it might mean for an original sketch. Take for example the sales at auction of iconic comic art - original creations that provided the foundation for the superhero franchises dominating box offices. In 2022 alone, Heritage has sold the following pieces of comic art: $3.36mm for the first appearance of Spiderman’s black costume, $630k for the original Captain America #1 cover art, and $360k for X-Men #271 original art. That’s just this year, but the takeaway is that there is appetite for the original art behind successful franchises.
High risk offering. As is clear from the bull case, capturing significant upside from this valuation is largely predicated on the maturation of the VeeFriends franchise into a global icon with incredible scale and deep adoration. Of course, VeeFriends is not the only NFT project chasing that status, as we’ve discussed in prior editions of Bull Case Bear Case, and in Gary Vee’s own words, 98-99% of NFT projects will fail...failure meaning ending up effectively worthless. Now, assuredly, VeeFriends is as well positioned as any to avoid falling into that 1%, and perhaps the asset here will remain a culturally significant artifact regardless, illustrating the intensity of the NFT boom. Gary himself is also aligned with the asset, retaining $68,750 (25%) in equity. Unquestionably though, the $275,000 valuation raises the bar for what must be achieved, with that value already on par with certain coveted pieces of comic art from franchises with a level of global acclaim so high that it’s difficult to imagine pretty much anything rivaling them.
Valuation raises questions. Consider this. Our data at Altan Insights currently shows that there are 372 offerings available via either IPO or trading on Rally. Of those 372 offerings, 344 of them are currently valued at less than $275,000, the valuation here. 92% of assets available on the platform have a lower valuation than this sketch. 92%! Note that the sourcing fee here is nearly $20k, which contributes in taking the valuation to these rare heights. None of this is to say the valuation is totally unfounded, given the activity at auction and the success of the VeeFriends brand, but a bear would surely find more favorable places to deploy capital on the platform. Revered American presidents, iconic sports stars, major entertainment franchises - all have assets of somewhat similar scarcity trading at lower valuations. The scarcity of this asset is also perhaps somewhat mitigated by the inclusion of 15 original sketch cards for VeeFriends Series 2 characters in the zerocool set, though those values could also provide potential catalysts once the cards surface and sell.
Cooling illustrates hype culture. While the initial results of the zerocool drop and the subsequent resale appreciation was remarkable, prices for VeeFriends card boxes quickly dropped from a peak of near $15k all the way down to $6k. That is, of course, still well above the retail price of $2,150, but the burst of the initial hype bubble also extended to individual cards. A Rare (/8) Brave Bison card sold for over $10k in mid March; by early April, the sale price of such a card was $337. A Base (!) Gratitude Gorilla sold for $12k in mid-March; by early April, such a card sold for $620. These prices are still nothing to sneeze at, but the roller coaster is illustrative of hype culture, which some would argue is emblematic of the entire NFT space at present. Is there legitimate interest in the product, or are market dynamics purely speculative? The VeeFriends project likely needs to sustain legitimate, sincere interest for years to come for the sketch to retain value and appreciate; by all indications, it’s off to a remarkably good start, but trends like these have often proven fleeting.
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