Bull Case Bear Case: Supreme Pinball, Barkley Playoff-Worn Jersey, The Godfather, and More
March 22, 2022
Dylan Dittrich, Bradley Calleja
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!
2018 Supreme Pinball Machine
3/25 @ 12:00PM ET
A hypebeast’s dream. Simply put, no brand is more closely associated with the hype culture in consumer products in the 2000s and 2010s than Supreme. What started in the mid ‘90s as a niche skateboard brand blossomed into a global, pop culture phenomenon, with limited run releases and collaborations drawing fervent demand. In fact, the global nature of the Supreme phenomenon should serve as a key part of a bull’s thesis; the brand has six stores based in Japan, and the country is credited with a particularly devoted and passionate Supreme following. Locations also exist in London, Paris, Milan, and Berlin outside the US. The boxed, red “Supreme” logo, based on the work of artist Barbara Kruger, has become a cultural icon. From literal Supreme bricks to Colgate toothpaste collaborations, Supreme products consistently sell on resale markets for multiples of their retail prices, drawing lines of Supreme fans (and resellers) that span city blocks on launch day.
Rare air. Retailing for $9,600, the Supreme Pinball Machine is among the most expensive Supreme goods ever sold. That puts the asset in relatively rare air, alongside the likes of collaborations with renowned artists like Damien Hirst and George Condo, as well as dearly-coveted Louis Vuitton luxury items. Just 200 machines were built, with only 12 available to the public. For collectors seeking the largest, loudest, and most in-your-face Supreme flex for their homes, it’s hard to look much further than a pinball machine, and Rally will be one of few places where such a machine is readily available for purchase. Speaking of pinball machines, per pinballprices.com the average sales price of used modern (1978+) pinball machines rose 28% in 2021, with robust growth since 2018, as consumer demand for at-home gaming increased.
Strength at auction. First, that a Supreme pinball machine has appeared at Christie’s and Sotheby’s five times tells you a lot about the elevation of the brand and the modern luxury company in which it can be viewed. The two most recent times a machine has sold, it’s been for well in excess of the high estimate price. In both December 2020 and December 2021, the high estimate was $30,000. The results were $81,250 and $52,500 respectively (the latter for Rally’s machine). Results have been volatile, though. A December 2019 result of $32,500 against an estimate range of $30-50k likely forced Christie’s to reconsider their estimates for the machine, and the 2021 result was quite the step down from 2020.
Losing its cool? Back in November of 2020, VF Corp acquired Supreme for $2.2 billion. The acquisition left many to wonder if the rebellious brand would see its cool factor diluted under large corporate ownership (though itwas 50% owned by private equity firm, the Carlyle Group, previously). Collaborations with VF-owned properties like Dickies and North Face fell somewhat flat on a relative basis, with resale prices in the ballpark of (gasp!) retail prices, supporting fears of the doubters. From a mid-2020 peak of approximately 14 million Instagram followers, Supreme’s account following is actually down today to 13.3 million. The brand’s most hype-riddled, iconic moments may be behind it; the question is whether nostalgia for those moments will win the day longer term.
Limited target demographic. Supreme is no doubt popular, particularly amongst the hypebeast masses, but how large is the venn diagram between Supreme fans, those that can pay $60,000+ for a Supreme pinball machine, and those that would want a Supreme pinball machine? Perhaps the TAM increases if you consider larger-wallet businesses seeking to add flair to a commercial space. Still, as illustrated by the volatility in auction results, consistency of strength in demand is not guaranteed.
Lower cost options available to collectors. While they may not boast Supreme hype or scarcity, there are various culturally-relevant arcade gaming options for collectors seeking an in-home piece, and almost none of them cost $60,000. Whether its Marvel, Star Wars, DC, even the Beatles (okay, that’s a different target demo), it’s rare to see a machine dramatically exceed $15k in price. Perhaps that doesn’t matter to someone with five figures to spend on pinball or the like, but it bears noting nonetheless. Indeed, this is one of the very most expensive pinball machines ever sold. One of few machines to notably outsell the high for a Supreme machine was designed by renowned artist William T. Wiley and was more art piece than machine - it sold for $125,000 and was exhibited in the Smithsonian.
1971 The Godfather Screenplay
3/24 @ 12:00PM ET
Unparalleled film legacy. Is there a film in existence that draws more derision from flummoxed fans when someone says they haven’t seen it? The Godfather was and is both an enormous commercial and critical success. The film won the Academy Award for Best Picture, Best Adapted Screenplay (particularly relevant for this asset), and Best Actor (Marlon Brando), on a total of 11 nominations. Critical reviews were almost universally not only positive but effusive in praise. It was, for a time, the highest grossing film ever, and has grossed close to $300mm in total. Consult any ranking of the top American films ever made, and you’ll invariably find it at or near the very top. Its influence in future gangster works is far-reaching, and it's among the most referenced films ever. Simply put, it would be difficult to find a more culturally-revered film than The Godfather, making this artifact from its not-yet-complete creation all the more significant.
Strong appreciation. However you examine the sales of Godfather Screenplay drafts, the results reflect a strong track record of appreciation in recent years. Back in 2015, the FX Coordinator’s copy of the second draft sold for $5,150. Now, that copy may be more attractive than the second draft belonging to a PA that sold in 2019 for $6,400, so appreciation there is more muted. But, by 2020, a third draft copy sold for $10,240. That’s 99% appreciation over the 2015 result, or 15% annually, and 60% appreciation over the 2019 sale, or close to 37% annually. If you were to look at the price Rally paid ($10,500), the total appreciation results are roughly the same, though the annual appreciation is of course more muted (since it was bought about a year later), at approximately 12% and 21% respectively.
Some evidence of fractional support. While this offering is really the first of its kind (more on that in a moment), first edition books that later became screenplays and hit movies offer some evidence of fractional appetite. Take the following books for example: Harry Potter and the Philosopher’s Stone, The Wonderful Wizard of Oz, Dune, The Hobbit, The Lord of the Rings Trilogy, The Spy Who Loved Me, Goldfinger, and Casino Royale. The average ROI since IPO for those books on Rally is 27.7% as of 3/18. While this is more memorabilia than book, it may nonetheless be demonstrative of fractional demand for ways to play premier movie franchises.
Movie memorabilia untested fractionally. While you might point to Star Wars action figures, comic books, or books that later became movies as signs that the space is embraced by fractional investors, this offering is really the first pure movie memorabilia asset to be offered fractionally. The arrival of movie memorabilia has been long called for by certain fractional investors, but nonetheless, there is no track record for the category on fractional markets. Memorabilia - broadly and generally - has been challenged relative to other categories in 2022, with a -13.6% average 2022 ROI through the end of February.
Some inconsistency and eye-opening results. While there have been standout auction results and appreciation as discussed in bull case, the Godfather memorabilia story is not one of consistent, skyrocketing growth. Even in the world of scripts, an original third draft (along with call sheets) sold for just $4,375 in April of 2021. And many items that have sold multiple times at auction have pulled back the second time. For example, Marlon Brando’s screen-worn overcoat sold for $39,000 in 2013 before selling for $36,000 three and a half years later. Robert De Niro’s suit from Godfather II sold for $24,000 in 2016 before selling for just $18,000 one year later. The movie memorabilia market may be less one of steady appreciation and more one highly dependent on the moment and buying pool in any given arena. However, the ultimate success or failure of this offering will be based less on auction timing, somewhat mitigating that weakness.
Potential premium and limited catalysts. As noted throughout the bull case, comparable screenplay copies have displayed consistent appreciation over the last decade. Rally will IPO their copy at a valuation that is more than $2,000 higher than any public sale to date and at a 16.92% premium to their purchase price. With only three sales to support the 15% annual appreciation trend, the offering will open in uncharted valuation territory. The IPO market cap is based on an historic returns and an assumption of recent appreciation that has not been supported, or contradicted, on the auction block as of today. With limited sales data and only two relevant auction results in the past five years, liquidity has been limited and the potential for a breakout sale or catalyst will be few and far between.
Helen Keller 1892 Book (Inscribed to Frances Cleveland)
3/22 @ 12:00 PM ET
Recent appreciation. This book was acquired from RR Auctions in September for $11,250. Prior to that sale, the most expensive comparable result was in 2019 for $6,235. The nearly 100% appreciation in less than two years follows a general trend found within the historic book and memorabilia market but outpaces many comparable texts we have previously reviewed. While an initial reaction might be to point out that it was Rally who established the new record for this book, it is important to acknowledge that there was an underbidder priced directly below the hammer. Based on a quick review of other comparable sales, the lot would have been appraised around $9,000-$10,000 heading into the auction, which gives a level of comfort knowing this was not an outlier sale. With consistent appreciation, historically relevant inscription, and a reasonable purchase price, this Helen Keller signed book is a unique asset that differentiates itself from many of the other fractional books offered to date.
Incredible legacy with museum potential. When it comes to pricing pieces of historic memorabilia, one important factor to consider is the museum market. Helen Keller is a central figure whose life and story is taught within the U.S school system. Her work as an advocate has helped maintainer status as a leader within the disability rights community and while there was plenty of stigma that followed throughout her activism, she now rests in peace with little to no controversy surrounding her life. In a time when segregation was commonplace, Keller spoke out openly against the oppression of minority groups and explicitly challenged racist views that were still accepted around the country. Believe it or not, Keller’s disability was actually questioned during her life as naysayers could not imagine someone who was both blind and deaf having such impressive penmanship and education. Those theories have all been debunked which makes her accomplishments even more incredible, as she was doing things that people could not believe could be done by someone who was deaf-blind.
Finding value in lower IPO value. The average return for books on Rally’s secondary market is 0.56% but that number does not tell the whole story. This offering will IPO at a $15,000 market cap, which sits well below the average IPO price for books of $41,790. There are 36 books trading on Rally and only eight of them have opened at a price at or below $15,000. Are you ready for an interesting fact? More than half of the books trading on Rally, 23 of 36, are currently trading below their IPO market cap. There are eight books that were offered at a market cap of $15,000 or less and all eight are currently trading positively with an average return of 73.7%. The secondary market success of assets with low IPO market caps has also translated across the rest of the Rally platform as well. The average ROI for assets trading on Rally is 5.68%, but for assets that were offered with a market cap below $20,000, the average ROI is 90.14%. Where did that data come from? We'll give you a hint.
Unproven market. This will not only be the first Helen Keller book to IPO on Rally, it marks the first ever Helen Keller-related fractional IPO. Unlike Superman comic books or Mickey Mantle baseball cards, data surrounding this asset and the appetite among investors is largely unknown. On one hand, that could present an opportunity for investors, but on the other, the track record for historic books and memorabilia has been volatile. There have been winners, such as the Declaration of Independence, but assets that would comp more in-line such as an Albert Einstein letter or Journals of the Continental Congress have lagged with returns below -30% respectively. The asset is an impressive piece of literary history, but with no foundation for performance or buyouts plus an active secondary market filled with more commonly recognized assets, there could be valid concerns regarding trading performance and liquidity.
Market cap that exceeds recent prices. The most expensive sale for this book was the purchase by Rally in September. As mentioned above, the simple fact that Rally was the highest bidder is not a bearish case on its own since in any auction that attracts multiple bids, there is an under-bidder. What this does mean though is that Rally paid an amount for this book that no other bidder was willing or able to pay, and now that book is being offered at a price that is 23% above their winning bid.
Poor pre-20th century book returns. As mentioned, the 36 books that are currently trading on Rally’s secondary market have delivered an average return of 0.56%. There are 11 books published before the 20th century that are currently trading though and those offerings carry an average return of -18.79%. Only two of the eight books published in the 1800s are trading positively and the 19th century has returned -15.27% on average. To date, the books that have displayed the most appreciation on Rally have primarily been well-known classics from the 1900s and literature that has since been translated into movies.
1994 Phoenix Suns Charles Barkley Career High 56 Point Jersey
3/22 @ 2:30PM 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. This past weekend, his 1984 Star card in BGS 9.5 condition set an all time high of $31,200 at PWCC. That peak appears to be the highest price paid for any Barkley item at auction.
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 Fleer 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.
Disclaimer: You understand that by reading Altan Insights, you are not receiving financial advice. No content published here constitutes a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. You further understand that the author(s) are not advising you personally concerning the nature, potential, value or suitability of any particular security, transaction, or investment strategy. You alone are solely responsible for determining whether an investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal financial situation. Please speak with a financial advisor to understand if the risks inherent in trading are appropriate for you. Trade at your own risk. Past performance is not a guarantee of future results.