Bull Case Bear Case: The Week of January 24th (Pro Edition)
January 25, 2022
Dylan Dittrich, Bradley Calleja
Welcome to the second 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!
1948 Leaf Warren Spahn (PSA 8)
1/25 @ 2:30pm ET
An all-time workhorse. Warren Spahn was essentially omnipresent in baseball for over two decades. He was selected to 17 All Star Games, is sixth all time in wins (surpassed only by dead ball era pitchers), eighth in innings pitched, and sixth in shutouts. He led the National League in wins eight times. These numbers are made all the more remarkable by the fact that Spahn served in World War II and didn’t record his first win until the age of 25.
Rarified air for Spahn. In the entire PSA population of over 26,500 1948 Leaf cards, there are just 97 PSA 9s and 3 PSA 10s. This Spahn card’s standing as one of four PSA 9s (with just one PSA 10 higher) puts it in the top 0.5% of cards in the population. While none of his 1948 Bowman cards have attained PSA 10 status, there are ten PSA 9s in that population (putting it in the slightly less vaunted top 0.7%). Simply put, with the exception of the PSA 10, you’re not likely to find a more desired Spahn card.
Improvement in the Spahn market. After quieter results throughout the 2010s, Spahn cards have seen their breakout moments in 2021. Notably, the only PSA 10 example of this card sold for $252,000 in May, a 31% improvement over a $192,000 April 2018 result for the same card. At a lower tier of the market, results have been even more pronounced. A PSA 9 1948 Bowman sold for nearly $30k in this summer’s marquee Newman Collection auction at Memory Lane. That result was more than 3x the 2019 low for the card. Similarly, a July 2021 result of $8,400 for a PSA 8 1948 Leaf card was 2.5-3.5x results from 2018. A bull would be encouraged that today’s market continues to take notice of key Spahn issues.
Short of top tier, waning relevance. While Spahn’s resume is certainly impressive, as argued above, a bear might argue that much of his standing towards the top of many statistical leaderboards is the result more so of longevity than dominance. On many statistical measures that do not consider volume, he ranks far less favorably. For example, he is 199th all time in ERA and 145th in walks & hits per inning pitched. In 21 years of service, he won the Cy Young Award just one time. In a Hobby that doesn’t typically attribute as much value to pitchers as it does position players, a bear would argue it takes unquestionable dominance to remain relevant and command top values over time.
Muted track record of appreciation. Prior to the broad upturn in the market beginning in 2020, the track record for premier Spahn cards was not particularly encouraging. His 1948 Bowman card in PSA 9 condition sold with relative frequency at Memory Lane, and almost each successive result from 2015 onward was lower than the last: $16.5k in 2015, $13.2k in 2017, $11.3k in April 2019, and $9.3k in August 2019. Of course, the Newman auction this summer quickly rectified that pain, drawing nearly $30k. Results for PSA 8 1948 Leaf examples showed a similar pattern in the late 2010s. While the Spahn market participated in the broader market increase, a bear would have concerns about the sustainability of interest in sleepier moments.
Valuation concerns. As noted above, PSA 8 examples of this card are up in the range of 2.5-3.5x from 2018 levels, while the PSA 10 sale was just 31% higher in 2021 than in 2018. Applying the midpoint of the PSA 8 range to a $31k November 2018 PSA 9 sale of course gets you to over $90k, clear of the valuation here. Similar points could be made about the appreciation of the PSA 9 1949 Bowman card. However, whether that level of appreciation would carry over to a higher value tier of Spahn card is anything but certain, a hypothesis further disputed by the more muted PSA 10 value improvement.
International appeal. The most intriguing attribute of this card is not the fact that it features three of the greatest big men to step onto the court, but instead the reach and impact those three NBA legends had around the world. Tim Duncan was born in St. Croix and helped expand professional basketball throughout the U.S Virgin Islands while Dirk Nowitzki hails from Germany and played a valuable role in building attention around the NBA in Europe. No player had a greater impact on the NBA’s international appeal though then Yao Ming. There are actually studies conducted on the ‘Yao Ming Effect’ which examine how athletes from can influence entire economies in their home country just through their fame and following in sports. As of 2019, China accounted for 10% of the leagues global revenue and is their largest international market by far. In 2021, CNBC estimated that the NBA’s business operations in China are worth more than $5 billion and a study conducted last year found that the NBA is the most watched sports league in their country, outpacing internal leagues like the CBA and CSL.
One of One. The primary bullish argument collectors of sports memorabilia make when comparing their collection to sports cards is the unique quality of their assets. The one of one attribute delivers a level of limited supply with a presumed increase in demand that helps drive bidding wars at auction. This Triple Logoman is a one of one and while there are other cards on the market that showcase all three of these stars, this is without question the most valuable offering.
Where is the ceiling? There have been three seven figure sales Logoman sales at Goldin in the last two years alone and 24 six figure results. Some of the most expensive sports card sales have involved logoman cards including a Playoff National Treasures Steph Curry which sold for $5.9 million and is currently held in the Alt Fund II, and a Luka Doncic Logoman Auto that was sold via private sale for $4.6 million. While the Logoman on Collectable is nowhere near a seven figure card, prices for the unique parallels are consistently ranked among the top ten, giving further validation that they are viewed as attractive collectibles for the high-end investor class. In essence, this is a case of a rising tide lifting all boats, but more specifically, rising Logoman prices lifting all Logomans.
Narrow market. While numerous sales for Logoman cards have made headlines and turned heads over the last two years, on an overwhelming basis the top sales share one commonality: they are a Logoman of a single player. To new collectors this concept can be somewhat of a head scratcher and understandably so, why would a first year Logoman of only LeBron James price at a valuation higher than a Logoman of LeBron and say Chris Bosh or Carmelo Anthony? The answer is a bit complex but it comes down to the fact that there is only one single LeBron first year Logoman while there are multiple double or triple LeBron first year Logoman cards that feature LeBron plus additional players. This is the primary reason why a top ten list of Logoman card sales is filled with single patches but void of cards that feature multiple players. The high-end multi-patch Logoman card market is still underdeveloped and has not reached valuations comparable to the high-end single patch sector.
Big man bias. Yes, it’s real. From Shaquille O'Neal to Nikola Jokic, card prices for legendary big men in the NBA have consistently trailed prices of guards and small forwards. While Shaq cards are also impacted by on the onset of the junk wax era, prices never developed for other oversized stars such as Tim Duncan, Dirk Nowitzki, and Yao Ming. Topps Chrome Refractor Yao Ming cards have struggled to break five figures while Dirk Refractors have peaked near $30,000. Tim Duncan cards have experienced some positive appreciation over the years but even those prices fall well below players of similar stature. Tim Duncan is arguably the greatest power forward to ever play the game of basketball and while his 1997-98 Metal Universe Precious Metal Gems Card sold for $218,000 in April, establishing a new ceiling for Duncan rookie cards, the prices are still nowhere near others that are considered the best at their respective positions. Names like LeBron, Curry, Jordan, sell for significant premiums compared to names like Malone, Chamberlain, and Kareem. There are no signs of big man bias disappearing anytime soon so a lack of love for power forwards and centers will continue to restrict prices.
Laggard Logoman performance and retained equity. There are currently three Logoman cards trading on Collectable and the results have not been great. All three are down more that -27% and two are trading at prices more than 40% below their IPO market caps. The average return for Logoman cards on Collectable is -38.33% and the median ROI is -41%. There have been 15 buyouts on Collectable to date but there have been no buyouts for Logoman cards. This offering also carries 45.9% retained equity which is not necessarily a negative, but it does give investors less influence over buyout decisions on a share-weighted basis.
1970-71 Bobby Orr Photomatched Jersey - Collectable
1/27 @ 2:30PM ET
Unrivaled resume. Perhaps Orr isn’t worshiped like Gretzky by the more casual hockey fan, but to those in the know, he ranks very highly (think: easily top 5) among the best players of all time. Keep in mind as we list these achievements that Orr was a defenseman. Nine time All Star. 3x Hart Memorial Trophy Winner (MVP). 8x Norris Memorial Trophy Winner (Best Defenseman) - all time leader. 2x Stanley Cup Champion, Conn Smythe Playoff MVP both times. Led the NHL in points twice (only defenseman to do that). Led the NHL in assists five times. 3rd all time in assists per game. 2nd all time in Plus Minus. 5th all time in points per game. Orr simply changed the sport with his attacking abilities as a defenseman, demonstrating unparalleled speed and power.
All-time season. In the 1970-71 season, which this jersey is believed to be from, Orr became the first player (ever - defenseman or otherwise) to reach 100 assists in a season, set the defenseman records for both points and assists in a season, set the record for highest single-season plus minus by a defenseman, and won the Hart and Norris trophies. The match was conducted by Resolution Photomatching, which most notably conducted the photomatch for the three most expensive basketball jersey sales of all time. In 2019, Classic Auctions sold Wayne Gretzky’s regular season home debut jersey for $221k. At the time, it was advertised as photo-matched, but without a letter from a photo-matching service. At Heritage two years later, with MeiGray photo-matching, it sold for $660k. This Orr jersey was photo-matched by similar standards when it sold at Classic Auctions in February of 2021 for $209k. With the photomatch completed by Resolution between then and the IPO almost a year later, a bullish investor may find the increased $399k valuation more than palatable.
Track record of high-value sales. Six figure sums for Orr jerseys are not a new phenomenon. Orr jerseys, not more spectacular than this one, have attained six figure results at auction since the mid 2000s. In fact, a jersey believed to be from the very same season sold for $135k at Leland’s in 2006. While the card market has skyrocketed since (whatever multiple you use, it’s significantly more than ~3x), memorabilia’s appreciation has been slower, particularly over the last two years. Bulls would argue that the category is due a catch-up period. An already Resolution-matched jersey believed to be from the same season sold at Heritage in August of 2020 for $150k. That this jersey, not yet Resolution-matched, sold for $209k in February of 2021, 46% higher, is perhaps indicative of a market for these items that is beginning to advance.
Market inertia challenging to overcome. While bulls might argue memorabilia is due a moment in the spotlight relative to cards, bears might argue that the consistent laggard status has persisted for a reason. That esteemed Orr jerseys have been selling in the low to mid $100k range since the mid 2000s and have only recently nosed just above $200k is suggestive of a long term return profile in the low to mid single digits. Given the range bound nature of results over the course of a decade and a half, the $399k valuation may prove difficult for investors to swallow. The volatile and not upward-trending NHL viewership numbers over the last decade will do little to assuage these concerns, though there is some reason for optimism as the league begins its new deal with TNT and Disney (ESPN).
Photo-match uncertainty. To be clear, the photo-match appears quite conclusive. The concern, however, is that the match is conducted to two undated images. These images are believed to be from 1971, and there are other supporting details - relating to the stamp on Orr’s stick in one photo and the contract in question in the contract-signing photo. There’s very little reason to believe the jersey isn’t from 1971. Rather, the point is that the increased credibility of the Resolution photomatch is not likely on par with the Gretzky jersey, for example, where multiple specific games were matched. It’s not uncommon to see a photo-match add multiples of value, but the photo-match must significantly advance the effort of placing the item on the player at a specific point. Therefore, the corresponding increase in valuation here (nearly doubling in less than a year), where those advances are perhaps lacking, may not appeal to a bearish investor.
Long fill time. This asset has been open for early access since December 26th, with considerable press coverage since. Should the asset not fill quickly upon its official opening, about a month later, there may be greater ask volume than bid volume when the asset opens for secondary trading. Assets following a similar path to full-subscription have experienced challenged trading debuts.
Aldous Huxley: Brave New World (1st Edition) - Rally
1/24 @ 12:00 PM ET
Rare book returns on Rally. With 28 assets trading, the average return for books on Rally is 43%. In total, 15 books are trading positively while 12 are currently priced under their market caps. Before we dive too deep into performance data, it is important to note that Brave New World was published in 1932. With that being said, books published in the 20th century have outperformed the sector overall, as copies printed after 1900 are up 52% compared to books published prior which are up 15% on average. Under more of a microscope, returns are even better. Books published in the 25-year range between 1930-1955 are up 106% since IPO and out of the eight examples trading, only one is negative while five are up 100% or more.
Impressive condition. Prices for Brave New World have fluctuated significantly over the last three years and while that is in part to general market trends, it is also tied to the condition of the books sold. While this is not the best conditioned example that has sold in the last five years, it is within the top 10%. The book has maintained its deep blue color minus some minor sunning on the spine. The coloration of the hardcover emphasizes wear and while the Rally’s example does have visible damage to its corners and edges, I have not reviewed a first edition copy that has not displayed similar chipping. For a book that was published 90 years ago and clearly sat on a shelf for the majority of its life, the overall state is one of the best available, helping propel it towards the top-tier of valuations. During this recent surge in prices, there have been sales that have settled in the mid four-figures for lesser quality copies which can be used when identifying trends but are not relevant as direct comps.
Controversial relevance. Thanks in large part to George Orwell and his cult classic 1984, speculative fiction has carved out a corner in the rare book world that has been attractive to collectors and investors alike. Books that the collecting community deem as culturally relevant have found an audience of buyers as their controversial takes are viewed as potential prophecies. There is an aura around books like Brave New World or Orwell’s 1984 that is attractive for movie adaptation and while a few of these have already been produced (we’ll get to those later), the general thesis around these novels is that they will stand the test of time as people remain weary of big government.
High markup and fees. Rally won this copy at The Gary Munson Collection of Horror and Fantasy Rare Books Auction hosted by Heritage Auctions in October for $10,625 and their IPO market cap is 31.76% higher than the purchase price. Baked into the offering amount is a steeper than usual sourcing fee which equals 15.25% of the total proceeds. Compared to another book that IPO’d on Rally recently, Moby Dick, the markup was 16.7% while the sourcing fee was 11.68%. The $14,000 market cap for this offering is the highest this book has ever been valued at and the Heritage sale was the second most expensive price publicly paid for a first edition copy to date. The most expensive sale took place at Christie’s on September 17th when a copy sold for $13,750. The Christie's book displayed similar wear but closed at a price that was five times its original estimate. That Christie’s auction was a breakout event for books as multiple examples including copies of Dune and Of Mice and Men reached prices that far surpassed the previously appraised valuations. Prices have since maintained but have failed to appreciate beyond that banner event.
Box office dud. Remember that part about how shows and movies that are based on books which promote dystopian societies are attractive to TV audiences? On one hand, for the sole purpose of maintaining relevancy, that concept is viewed as a bullish point for a book like Brave New World. There is just one problem; What if the lineup of TV shows that have been produced based on Brave New World have been considered failures? In 1998, NBC aired a television movie with an impressive cast that included Leonard Nimoy from Star Trek fame. The film fell flat though and reviews were mixed, earning a 46% from Rotten Tomatoes and 5 stars out of 10 from IMDb. Then in 2020, another Brave New World series debuted, this time on the NBC streaming service, Peacock. If you are curious how that show performed, it premiered on July 15, 2020 and just three months later was canceled after one season. There was a grand total of nine episodes and while the Huxley adaptation received some praise from sites like Vanity Fair, overall reception was poor and its ratings fell among the bottom 20% of all 2020 Peacock shows. For a book that is seemingly fit for the big screen, no one has managed to create a movie or series that is even remotely viewed as a success.
Are books returns on the decline? While books returns on Rally are up overall, performance has lagged as of late. Over the last four weeks, books are down -33.04% on average and the asset class has closed negatively in four consecutive week. Over the last week, books fell -11.74% on average, representing their worst trading week since real-time trading opened on Rally. The previous three weekly returns were -4.31%, -10.91%, and -6.08%. As more attention has moved towards assets like sports cards, memorabilia, and comic books, money has moved away from books. Whether this is nothing more than a short-term rotation or a signal of more ominous times ahead is something that will impact the market cap of Brave New World when it begins trading on Rally later this year.
1978 Kenner Star Wars Vinyl Cape Jawa Action Figure (AFA 80)
1/25 @ 12:00PM ET
Early merchandise from a transcendent franchise. 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. At the genesis of those merchandise sales were the Kenner action figures of the late 1970s. The franchise continues to grow in notoriety and popularity, and is now more frequently in the public consciousness 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. Jawas in particular remain relevant today through these series, featuring somewhat prominently in The Mandalorian.
Incremental Rarity. The Kenner Star Wars figures are among the most well-known and treasured toys in existence. Importantly, Rally’s figure comes from the earliest production, the Star Wars 12 Back-A series. As far as Star Wars collectibles go – and really toys more generally – this is close to as blue chip as it gets. But for Jawa figures, the standing gets even more distinguished. This particular figure features a vinyl cape. Originally, the Jawa figures were to be produced without a cape. However, due to the creature’s smaller size, Kenner feared customers may feel shortchanged by the figure. So, the cape was added, originally using a vinyl material in production. Those fears persisted, though, and Kenner updated the cape to cloth material to further increase the perception of value amongst consumers. That makes the early, vinyl production a relative rarity. There are 223 of these figures (52 in AFA 80 condition) in the AFA population report, as compared to 480 (172 in AFA 80 condition) without the “Vinyl Cape” distinction. It’s important to note that those population counts are inclusive of Back-A, Back-B, and Back-C variants, and therefore the Back-A population may be lower, though it is believed that the majority of Vinyl Cape Jawas were Back-A.
Market data supportive. A number of Star Wars-related items have been offered to fractional shareholders. A 1978 Kenner Obi-Wan action figure was funded swiftly by 642 investors. A Darth Vader figure from the same set IPO’d on Otis in September at a valuation of $11,200 and is since up 124% to $25k, which is coincidentally not far from the valuation at hand here. Outside of toys, Star Wars #1, the comic book, is up 370% since IPO on Rally. Rally’s purchase of this Jawa figure at LCG Auctions for over $25k took the market for the figure to new heights. However, the recent sale of another AFA 80 figure on eBay for $20k, which featured a lower Card subgrade (75 vs. 80), offers support in suggesting that result was not a total outlier, and the sourcing fee here ($567) adds little extra froth to the offering valuation at $27k.
Population scarcity lacking. Relative to the populations for other Kenner Star Wars figures available fractionally, the size of the population for this figure isn’t particularly impressive. The “SKU on Figure Stand” Obi-Wan and Darth Vader have AFA populations of 61 and 38 respectively (using the Dynamic report figures). Versus the static totals on the AFA report, both of those populations have grown considerably since the last update (up 43 and 24 respectively), and they remain well below the population for the Vinyl Jawa - acknowledging the Jawa report includes multiple variants - despite commanding less value. That those populations are growing as they are introduces additional scarcity concerns. It should also be noted that there are 109 Vinyl Cape Jawas graded higher, though again, the variant breakdown is not presently clear. The latter point alone introduces further risk. It appears the population report from AFA is under significant development - in its current state, navigation and clarity of understanding are challenges which reduce the transparency in the category.
Character impact limited. While the Jawa figure’s standing as one of the original releases is undisputed, and the vinyl cape makes it additionally collectable, new demand drawn to the space may be less intrigued by the appeal of owning this figure relative to any number of other key characters that feature more prominently in pop culture. Their place in the Star Wars universe is solidified and consistent, but they are peripheral characters that don’t resonate as well with a broader audience.
Rapid market appreciation limits near-term upside? Before Rally purchased the figure at LCG, it had been over two and a half years since one sold for five figures. While values have surged for Kenner Star Wars figures across the board, the rapid appreciation, in addition to continued graded population growth driven by the appreciation, may curb the near term upside in values. In fact, in successive years (2019 and 2020) AFA 85 graded examples of this figure actually dropped in value at Hake’s, from $22k to $10k to $8k. That figure, of course, rebounded in 2021, with a $24k June 2021 sale, though the lower-graded example here is offered at a higher valuation. This example may be particularly vulnerable, as there are a large quantity of higher graded examples, and there may additionally be increased high-end demand for other, more scarce models. For example, the Back-C variant, believed to be significantly more rare though it was produced later, sold for $17.5k at Hake’s in 2020, a result which - at the time - was far stronger than AFA 85 Back-A variants. Seeking additional scarcity, a collector may also prefer the Meccano French release of the figure, which has an even lower population with just two AFA graded examples.
1996 N64 Mario Kart 64 (WATA 9.4 A+)
1/26 @ 12:00PM ET
Nostalgia for an increasingly high-earning generation. The Nintendo 64 was released in 1996, putting it right in the sweet-spot of nostalgia for children of the 80s and 90s. Nearly 33 million units were sold worldwide (including over 20 million in the US). Back in 1996, per U.S. Census Bureau data, there were only 100 households in the US, meaning the console was in approximately 20% of them. Of course, Mario Kart 64 was a smash hit, becoming the second highest selling N64 game of all time, behind Super Mario 64. 9.87 million copies of the game sold, meaning that more than 25% of those with the console owned the game. Many of those children of the 80s and 90s then brought the console and the game with them - particularly to college - as they grew, further strengthening the nostalgic bond. There are few video games that would be as nostalgic for such a broad swath of a generation seeing an increasing level of income and spending power.
Favorable momentum. Rally purchased this game at Heritage on October 29th of last year for $66,000. Sales of the title in this variant are fairly rare, but at the time, it marked a high for auction sales of Mario 64. However, at the Heritage auction in December, as other titles were challenged or simply treaded water, this game soared. Another 9.4 A+ copy sold for $108,000. Rally’s pricing of the offering has remained more linked to the October result than the large December outcome, which provides bullish investors with some level of comfort and buffer.
Early population signs encouraging. While population size is a significant risk factor to be covered in a moment, early indications are that this game in this grade resides in fairly rarified air. To date, 9.4 A+ is the highest grade of the red variant to be sold at Heritage. No copy graded higher has appeared at the auction house, and those that are graded higher have been from the less rare, “Player’s Choice” variant. So, while uncertainty persists, that there hasn’t been the appearance of a higher grade during a remarkable, headline-making surge in the market provides some reassurance to investors. However, the first 9.6 A++ will appear at Heritage in April, in addition to another 9.4 A+.
Population question marks. To date, WATA has not released population data for the Nintendo 64, having only recently introduced its first population report, only for NES games. Until that population data is revealed, which we might expect to be a 2022 event, population remains an elevated risk factor. This is particularly relevant, as approximately 9.87 million copies of the game were sold. Now, only in the neighborhood of 1 million of those would be relevant to this copy, since after the million sale mark, the “Player’s Choice” designation was added to the box, effectively drawing a line between the earlier and later variant. Still, given the volume,