Bull Case Bear Case: NBA Jam, Barkley/Embiid Jerseys, Nikon Camera, Mbappe Rookie, and More (Pro Edition)
March 15, 2022
Dylan Dittrich, Bradley Calleja
Welcome to the latest edition of Bull Case Bear Case, with a full slate of offering analysis for our Pro subscribers. 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!
William Golding: Lord of the Flies (1st Edition)
3/15 @ 12:00PM ET
Strong secondary market returns. There are currently 32 books trading on Rally and the asset class has an average ROI of 5.56%. That number on its own is not worth celebrating, but once you drill deeper, the performance looks even better. Books from the 20th century are up an average of 13.1% and the only other offering from 1954, the Lord of the Rings Trilogy, is up 124%. While books have struggled recently, most asset classes have struggled to find their footing in the last couple of months on Rally.
Blue-chip and best-seller. Find any list of the top books published and there is a good chance Lord of the Flies is mentioned. With over 25 million in US sales alone, the book is a cult classic that has become a staple in grade-school libraries across the country. The rare book market is still young and in a developmental stage. Investors looking for the lowest amount of volatility with robust upside will likely continue trending towards books that the general population is familiar with.
Controversy as a catalyst. Like the saying ‘All press is good press’, when it comes to books, is all controversy good controversy? Lord of the Flies has consistently made its way onto lists of banned books and while the initial push against the novel started in the 1990s, there have been anti-LOTF movements through the 21st century. As a matter of fact, as I type this bullish case, the Oklahoma Attorney General is currently reviewing a list of 51 books, one of which is Lord of the Flies, to determine whether it violates the state’s “obscenity laws”. So why is controversy and potential banning a bullish case? It helps maintain the relevancy of the book. The primary force that has driven this book throughout the last 50-years has been its influence within the school system. Students are reading less today, and one study by the National Assessment of Educational Progress found that high school students are reading at the lowest levels since the mid-1980s. Even at a time when reading is not as popular, one way to keep a book relevant is the keep it in the headlines, which is something that Lord of the Flies has never had a problem with.
Outlier or overall trend? To date, there has been one five figure sale ever recorded for a first edition copy of this book. That sale, which occurred at Christie’s in September, closed at $16,250, which nearly doubled the most ever paid for a copy of Lord of the Flies. To further emphasize how much of a breakout that sale was, the book opened with an estimate between $2,000-$3,000 on Christie’s. Rally’s book was purchased for $11,000 and carries an additional 19.3% in fees and expenses. Even though the Rally IPO price is below that most recent sale, it is still double the price of the other two sales that occurred in 2021 and would be the second highest valuation ever for a first edition copy. The overall returns for Lord of the Flies have not been the greatest either. In 2013, Dominic Winter Auctions sold a copy for $9,058, which at the time, was an outlier sale that was nearly $2,000 higher than any previous price. That $9,000 result would stand as the highest price paid for more than eight years. From 2014-2021, there were seven sales of comparable copies and only one, the Christie’s sale, struck a hammer price that surpassed the 2013 result.
Lack of book buyouts. While the secondary market for books on Rally has returned positively on average thus far, that has been the only source of liquidity for the asset class to date. There has yet to be a single buyout offer made for a book on Rally let alone an accepted offer, and with the current trend of volatility on the platform, the boom or bust returns provided by the Rally trading floor might not provide an attractive outlet for investors looking for a quick-flip. Books were completely ignored during the buyout bonanza of comic books and while 11 different comic offerings have been sold, every traditional book offered by Rally is either trading, or awaiting trading.
Box office bust. There are books like the Wizard of Oz, which delivered iconic movies that are still attracting attention and money today. There are also book such as Dune, which have had movie adaptations developed within the last year. Then there are books like Lord of the Flies, which bombed at the box office. While over 25 million copies of the book have been sold, the movie, which premiered in 1990, reeled-in just 14 million in gross sales. There were rumblings of a new Lord of the Flies movie, but at this time there has not been much development. The potential filming is still listed in pre-production status and the latest update came in April 2020, which means at best, filming could end later this year with a potential release date in 2023. Whether or not a new movie will even deliver a positive impact is suspect though. There is no word yet on the budget or the actors that will participate.
1949 Nikon One Camera
3/16 @ 12:00PM ET
Collectable brand and camera. Behind Leica, Nikon is widely considered the second most collectable camera brand. The company, now a multi-billion dollar annual revenue behemoth, emerged as a civilian product brand from more humble roots following WWII. After producing military grade optical equipment during the war, the company’s operations shrunk to just one factory and 1400 employees (down from 19 and 23,000). Under Allied occupation, Nikon (then called Nippon Kogaku) pivoted to camera production, with the Nikon One being the first experimentation of the venture. The limited production (more on that in a second) and the circumstances under which the cameras were produced have made the Nikon One a significantly collectable item.
Natural scarcity. Based on available serial numbers, it is believed that approximately 750 Nikon Ones were produced. However, a number of these (about 20) are believed to have been used for testing, an additional 90 are said to have failed quality control, and 200 were repurposed to the later Nikon M model - this is per Robert Rotoloni of the Nikon Historical Society. That being the case, it’s possible that only approximately 400-450 Nikon Ones actually came to market. The passage of more than 70 years since production has likely claimed a number of additional examples, or at least compromised their condition. Of the last five Nikon Ones to sell at Leitz, the example here shares the highest grade of the bunch (B/A) with one other example.
Increasing auction demand for the category. Demand at the Leitz Photographica auction has strengthened considerably in recent years. The recent November 2021 auction saw €35.5 million in sales amongst the 48 highest-selling lots, for an average lot price of €73,950. Contrast that to €25.2 million two years ago, in November 2019, where the average lot price amongst the 48 highest-selling lots was €52,463. That’s a total improvement of 29% in two years. The 2021 auction also saw 73 five figure sales, versus just 51 in 2019.
Muted, spotty track record of appreciation. A quick glance at the chart of comps for this asset is enough to observe that consistency of results and a clear trend in values are absent. Now, like many assets, the sales are not all apples-to-apples. Condition varies, from B to B+ to B/A, etc, as do the serial numbers and accompanying lenses. But if we were to look at the path of B/A sales, setting aside the currency movement from EUR to USD conversion, the track record isn’t remarkably strong. Back in 2010, a B/A camera sold for 12,480 EUR. That same camera sold in 2012 for 18,000. In two years, that’s an impressive 44% appreciation. The increase from 2012 to 2021, when Rally’s B/A camera sold for 20,400? Just 13.33%, or 1.4% annually.
No fractional track record. Though Rally has offered one other camera asset, the "King of Thailand" Leica M6, the category is a relative newcomer to the fractional space. The Leica has yet to begin trading after funding at a $32,000 valuation, and it remains to be seen how the secondary markets will receive camera assets.
Potential Nikon weakness. At the most recent Leitz auction in November, 7 of 14 Nikon lots went unsold. Of the 7 that did sell, two were below the low end of the estimate range. This particular camera did exceed its estimate range both without and with buyer’s premium. 4 of 8 Nikon lots went unsold in the prior auction in June. While the specific asset is most important, this trend may bear watching.
1994 Sega Genesis NBA Jam (Wata 9.8 A++)
3/18 @ 12:00 PM ET
Memorable franchise replete with nostalgia. Simply put, NBA Jam is one of the most iconic sports video games ever produced. It started as an arcade game featuring 2-on-2 play amongst NBA superstars and was an immediate success upon its 1993 release, becoming the highest grossing arcade game that year. It has been reported that NBA Jam machines were capable of producing $2,400 in revenue per week at the time, and gross earnings figures over $1 billion have been bandied about for the game’s first twelve months. Given the success, it was later ported to consoles (like the Genesis), and quickly became a top seller there as well. The game has been celebrated in pop culture since, with EA Sports even buying the rights in the 2010s to modernize the franchise for a new generation. Various memorable features and phrases (“boomshakalaka”, “He’s on fire!”, “He’s heating up!”) have become enduring pieces of basketball lexicon. With many bullish on the potential for sports video games given the overlap between two collecting categories with growing audiences, NBA Jam serves as a foundational piece overflowing with nostalgic appeal.
It’s “on fire!” The end of 2021 and beginning of 2022 has seen this title notch some eye-opening sales, as high grades have finally come to auction. In October, another 9.8 A++ sold at Heritage for $31,200, establishing a record. Just three months later, in January, a like-graded game sold at Heritage for $38,400, quickly increasing that record by 23%. Back in July of 2021, the record price was $12,000, established on eBay for a game of the same grade. The valuation more than tripled in roughly half of a year, and that half of a year was actually a quieter one in the space more broadly, with some valuations coming back to earth after the summer madness.
Highest possible grade. While supply may be uncertain (more on that in a moment), investors can rest almost entirely assured that there will not be a higher graded copy of this game that comes to market. At 9.8 with an A++ seal rating, this is about as good as it gets. Yes, the Wata scale goes up to 10, but have you ever seen a 10 given? Much like in comic grading by CGC, it’s essentially unheard of, especially for a game that’s almost 30 years old. Just two 9.8 A++ games have come to auction thus far at Heritage. The next best grade to have come to auction is a 9.4 A. There may indeed be more copies out there, but they haven’t surfaced yet in the midst of a significant boom.
No population data. Though this game sits at the very top of the stack in terms of grade, investors do not know with certainty what the population is both at this grade and overall. To date, Wata Games has released population data only for NES, with other consoles to follow over time. The lack of knowledge around population of course presents significant risk, as does the threat of population growth. Video game grading - and high value video game sales - are relatively recent developments, ones that will likely draw new supply into the market as treasures are unearthed.
Priced well above record. When a like-graded game sold at Heritage for $38,400 in January, it was a record price for the title, as noted above. And the two recent sales effectively came out of nowhere, thanks to the lofty grade, which had not yet appeared at the auction house. After the 23% increase from October to January, the offering valuation here adds another 22% on top of the January record price. The valuation is a 51% increase on the October sale. That’s a sizable increase over a record in a fractional environment where investors have not been kind to frothy video game valuations, which brings us to..
Fractional video games under fire. After a roaring 2021 that saw video games perform better than any other asset class, the start to 2022 has been significantly more challenged. To date in 2022 through March 11th, the Altan Insights Fractional Video Game Index is down 19.2%. Zooming out further, it’s even worse: since its mid September peak, the index is down 56%. Seven video game assets have begun trading in 2022. The average ROI of those assets to date is -55.15%. The best performer of that group is down 43.33%. 2021 is very much in the rear view mirror for fractional video games. Taken in tandem with the above point around valuation, a bear may see reason for caution here.
2021 Joel Embiid 50 Point Game Worn Jersey Photomatched
3/15 @ 2:30PM ET
Matched to big performance. This jersey is photo-matched by MeiGray to two games from the 2020-2021 season. In the first, he scored 37 points against the Portland Trail Blazers. In the second, he notched 50 points for the first time, in addition to 17 rebounds and 5 assists. That point total is tied for his career high, achieved just one other time. He went 17 for 26 from the field and 15 for 17 from the line, adding in 4 blocks and 2 steals to finish a game high +22 in a 112-105 victory over the Bulls.
MVP Catalyst? At present, Joel Embiid remains the betting favorite to win the NBA MVP Award this year at -130, with Nikola Jokic trailing at +200. He’s currently leading the league in scoring at just under 30 points a game, and largely because of his play, the Sixers are second in the Eastern Conference with a 41-25 record. If Embiid can get across the finish line and win the MVP after finishing second last year, it may change the mainstream perception of his abilities, elevating him from stardom to inarguable superstardom. A deep playoff run and potentially a Finals run for the 76ers would be similarly beneficial.
Significant supply. Embiid wore three jerseys in the fifty point game alone! That means that you can’t even make the true 1-of-1 argument that is frequently made with most memorabilia assets. For what it’s worth, he wore this particular jersey in the third quarter, when he scored 12 of his 50 points - is that worse than a first quarter jersey in which he scored 14? That it has to be asked sort of speaks to the supply concerns at play. To date, Goldin has sold 15 game-worn Embiid jerseys. SCP has sold another 3. Heritage another. The vast majority of those are either photo-matched or have relatively ironclad provenance to a specific game. The highest result to date? $13,200 for a jersey worn in 14 games, including his first 20 point 20 rebound performance. Granted, that was way back in 2018, so it may carry a value multiples higher today. Still, in October 2021, a jersey used in four games with three double-doubles sold for $3,300. A jersey used for three different double-doubles sold in June for $3,000. Those aren’t 50 point games from an MVP runner up season, and the matching is from Fanatics rather than MeiGray, but they aren’t particularly encouraging levels nonetheless. Just last night, a full City Edition uniform from a game against the Celtics this season sold for $12,000 at Goldin, with proceeds going to charity. It remains to be seen how strong appreciation will be for matched jerseys of modern players, with supply increasing with essentially each passing game.
Harden increases risk. Much of Embiid’s MVP candidacy to date had been predicated on his ability to drag the Sixers to the top of the Eastern Conference as the lone star. Then in February, Philadelphia traded wantaway star Ben Simmons in a package that included several others for James Harden. With that, the scoring burden on Embiid is lessened considerably in theory, but expectations also rise for the team. A playoff failure would be damaging reputationally, and Harden hasn’t made the NBA Finals since his OKC days in 2012, despite consistently being either a centerpiece or important cog in Finals-contending teams. With Jokic continuing to dominate for the Nuggets in the absence of Jamal Murray and Michael Porter Jr, his MVP case may be strengthened against the recently-reinforced Embiid, which introduces risk to the upside catalyst.
Leading the next generation of talent. As Messi and Ronaldo decline from their peaks and approach retirement age, the global soccer world is looking to the next generation of stars to carry the sport forward. And carrying the banner for that next generation is Kylian Mbappe. After breaking onto the scene with Monaco as a 16 year old, Mbappe has scored 182 goals in 262 professional appearances, scoring at a rate of 0.82 goals per 90 minutes, and notching 1.23 goals & assists per 90. He has led the French Ligue 1 in goals the last three consecutive seasons. At just 23 years old, he is already the second leading goal scorer in Paris Saint Germain club history. He continues to rewrite record books based on his goalscoring prowess and youth, despite sharing the stage with other prolific talents like Neymar and now Lionel Messi. Mbappe boasts an outrageous 67.7 million Instagram followers. For comparison, Tom Brady has just 11.4 million. That illustrates the global scale of soccer fanhood and the incredible tailwind that many speak of when exploring the outlook for soccer cards and memorabilia.
Big move and big things on the horizon. This summer, it’s widely anticipated that Mbappe will make a long-rumored move to Real Madrid, leaving Paris behind to follow in the footsteps of countless global superstars that have suited up for Los Blancos. While he’s enjoyed considerable domestic success with PSG, winning three league titles, the league is not viewed as being amongst the most popular and most competitive in the world, though the former has changed since Messi arrived. There are few, if any, clubs on the planet with as strong a global profile as Real Madrid, and the team remains competitive both domestically and in Europe, as Mbappe discovered the hard way last week. If his global profile can even be raised further at this point, a move to Real Madrid would be the way to do it. Additionally, at next winter’s World Cup, defending champion France will look to Mbappe to lead them to glory once again, and he will surely feature as one of the tournament’s most marketed stars, particularly with Ronaldo’s Portugal in danger of missing out and Haaland’s Norway failing to qualify. The event has been widely discussed as a potentially crucial moment in elevating the profile of soccer collecting.
Blue chip card. There are cards from two sets that have established themselves as the most key, coveted Mbappe rookie cards: 2017-18 Topps Chrome UEFA Champions League and 2018 Panini Prizm World Cup. While there are earlier Mbappe stickers and cards, and of course the National Treasures cards of the world, these sets were the first to offer coveted parallels with limited print runs. The Orange Refractor (/25) is in relatively rare air, ranking as the third rarest parallel behind Red (/10) and the Superfractor (1/1). Mbappe autos were not included in the set, further limiting the number of high end rookie options - that was similarly the case for Panini Prizm World Cup. This card is one of three graded BGS 9.5, with 2 graded BGS 10, 3 graded PSA 10, and 13 of the 25 card print run graded total.
Soft recent sales, tough comps. At a valuation of $61,000, this offering is valued higher than any sale has been executed for an Orange Refractor, with the previous high being $51,660, paid for a BGS 10 in August of 2021. The Mbappe market hasn't appreciated since August, at least not to the degree one would hope for the valuation here. In fact, a PSA 10 Orange Refractor sold in February at Goldin for $46,200, while a PSA 9 sold at Alt for $19,000, slightly below a $20,000 sale from August. PSA 9s have sold most frequently, and that $19,000 sale is well off of the June 2021 peak above $47k. Key cards from the Panini Prizm World Cup set have trended similarly. A bear would argue that the valuation here significantly limits near term upside, particularly as the market has yet to show signs of turning markedly higher after beginning to stabilize from a late 2021 softening. It normally would not be a negative to buy at the lows, however, it can’t be argued that, at this IPO market cap, the card is offered at the lows.
Few short term catalysts. While it appears PSG will coast to a Ligue 1 title, ahead of second place Nice by 13 points, such an outcome is the base expectation given the talent at the club. Another Ligue 1 triumph does very little to boost Mbappe’s profile, particularly in the card market, which values highly visible accomplishments. For example, a Champions League win or a deep run in the competition would fit the billing. Mbappe was well on his way, scoring in both the home and away legs of a Round of 16 tilt with Real Madrid, before Karim Benzema scored a hattrick to eliminate PSG from the competition. That defeat effectively curtails the potential for the player to meaningfully add to his resume and generate momentum until either a summer move or next year’s World Cup. Given the valuation issues cited above, the lack of immediate catalysts becomes more troublesome.
Move poses risk. At PSG, there is little doubt that Mbappe can continue to do the following: compete for league leading goal tallies, win domestic titles, challenge for European titles, and enjoy a glamorous spotlight in one of Europe’s most glamorous cities for one of Europe and Nike’s most glamorous clubs, all alongside one of the sport’s most celebrated stars. Now, much of the same allure exists at Real Madrid, along with the heightened global profile mentioned above. However, big money transfers are anything but slam dunks, and players often struggle in new environments, making the outlook for Mbappe at Madrid more of an unknown than it would be at PSG. As we cited last week with Haaland, transfers like Eden Hazard’s to Madrid and Jadon Sancho’s to Manchester United (thus far) are cautionary tales. Is there an element of “if it ain’t broke, don’t fix it” here?
1994 Phoenix Suns Charles Barkley Career High 56 Point Jersey
3/20 @ 8:00PM ET
On court great. With how ubiquitous Sir Charles is in NBA coverage nowadays (more on that in a moment), it’s sometimes easy to forget what a dominant force he was on the court. 11 time All Star. 11 time All NBA. League MVP in 1992-93. Most recently: NBA 75th Anniversary Team member. For his career, Barkley averaged 22 points and 12 rebounds. Perhaps importantly for the longevity of his long-term, on-court legacy, advanced statistics love Charles. He ranks 14th all time in player efficiency rating, 14th in win shares, and 11th in value over replacement player. Barkley also featured prominently on the Dream Team at the 1992 Summer Olympics, leading the team in scoring en route to the Gold Medal.
As relevant as long retired stars get. This point may seem obvious, but it still merits mentioning. Barkley has served as a studio analyst for Turner Sports since 2000, and in the process, he has become one of the most beloved “analysts” and sports media personalities in the business. Yes, he occasionally says things that offend or make headlines for the wrong reasons, but overall, he remains highly popular and has tremendous name recognition across multiple generations. While he has said he will retire when his contract runs out, believed to be at the end of either the 2023-2024 season or 2024-2025 season, that means he will remain ever-present to the large and young NBA audience for at least a few more years. And odds are, he won’t fade completely out of the public eye once he retires from NBA on TNT duty.
Top tier memorabilia. While a number of Barkley jerseys have come to auction over the years, none have compared in stature to the one here. The signed jersey has been photo-matched by Meigray to three 1994 playoff games, including the game in which he set his career high for points (56) as the Suns swept the Warriors. In the game, Barkley went 23 for 31 from the floor, including 3 for 4 from three point range. After scoring the first 12 points for the Suns, Barkley, on his way back down the court, reportedly asked Warriors coach Don Nelson if he planned to double him. He went on to score 27 points in the quarter. While photo-matching is becoming more common, particularly for more modern memorabilia, relics from key career games of that era are more limited. Sales of photo-matched jerseys thus far this year in similar ranges: $144,000 for a 2018 LeBron James jersey matched to six regular season games including three triple doubles and $134,640 for a 2013 Noche Latina Kobe Bryant jersey matched to one regular season game. Barkley’s star-power and collectability are not nearly on the same level as either player, and the eras are completely different, but a bull would argue that those sales from relatively unmemorable games are supportive of (or at the very least, not detrimental to) the slightly higher valuation of a greater rarity from a more important moment. Michael Jordan is, of course, in a collectability category all his own, but this year, a 1996 uniform of his, photo-matched to two games, sold for $600,000, while a 1998 Last Dance jersey matched to a regular season buzzer beater drew $351,028.
Not beloved in the hobby. Barkley’s key rookie card is the 1986 Fleer, sharing that set with many other stars of the era. PSA 10s carry a not extraordinarily high population of 233. Nonetheless, it hasn’t been a favorite in the hobby, with a peak sale of $28k in April of 2021, and current values sitting just above $9k. That peak appears to be the highest price paid for any Barkley item at auction. His 1984 Star card in BGS 9.5 condition is not far behind with a $21k peak sale in May of 2021.
Nonexistent track record for high-value Barkley memorabilia. Along the same lines as the above point, there is effectively no track record for Barkley memorabilia selling at or anywhere near the valuation here. As noted in bull case, this jersey does stand out in myriad ways from the pack. Still, investors will have to come to terms with the fact that a Barkley jersey has not sold at auction for more than $12,000 - paid at Heritage in February of 2020 for a 76ers jersey, signed and photo-matched by Resolution Photomatching to one of two games in the 88-89 season against the Bucks (somewhat inconclusive). In February 2020, Barkley’s rookie card was worth only $1.5k, so investors do get some reassurance that the value would be many multiples higher by now, though memorabilia has lagged in the market run up, and this jersey is of a vastly higher standard. Nonetheless, investors face the uncertainty that comes with a track record that leaves much to be desired.
Weak fractional memorabilia track record. Since the end of the third quarter of 2021, 11 basketball memorabilia items have begun trading on Collectable. The average ROI of those items through 3/10 is -26.57%, with just two items trading positively (Durant Photo-matched High School Jersey +25% and Giannis Sneakers +5%). Year to date, the Altan Insights Fractional Sports Memorabilia Index is down over 8%, trailing broader market performance. The category has also lagged others in terms of average ROI since inception, with a -6.8% average return overall, though that figure is stronger on Collectable alone, with the Collectable Memorabilia Index sitting at -0.8%. Right or wrong, fractional shareholders have most often emerged bearish on memorabilia assets at their IPO valuation once they begin trading.
2002 Panini Stickers Cristiano Ronaldo RC (PSA 10)