Trades and Trends: Exploring the Impact of the Offseason
Tom Brady won his seventh Super Bowl in early February. Seventh! Only one asset of his was trading at the time. Since the end of February through July, his SP Authentic Rookie Card on Otis is down 26%. An additional five assets that are either Brady specific or Brady linked (2000 Playoff Contenders Hobby Box) are now off 26% from their peak on average and five of the six assets are down double digits.
Brady’s opponent in that Super Bowl, Patrick Mahomes, has quickly and decisively secured the title of heir to Brady’s throne with GOAT aspirations of his own. Mahomes has had four assets begin trading since football season ended. Their average selloff from their peak as of July 31st? 17%,with three of the four assets down double digits. And that’s with two of the Mahomes assets on Collectable rallying from 7/28 onward, following the $4.3mm record sale of his one-of-one Shield card.
The results for both players are worse than the drawdown from peak to July 31st for the broader Altan Insights 100. The index is down 11% off of its early February peak.
So what’s going on here? Why are these two underperforming the broader market? Last I checked, Tom Brady still appears to be getting younger, the Bucs re-signed their free agents for another run, and Brady may or may not be able to complete passes to a JUGS machine (I say fake, but if you asked this Patriots fan two years ago, I would’ve defended its validity to the death). Mahomes still has the craziest arm talent we’ve ever seen, the Chiefs bolstered his offensive line so he won’t have to run for his life, and one of his cards just set a football record.
While it’s early (bear in mind that most fractional assets didn’t begin trading until this year), it’s fair to wonder whether seasonality might be creeping into fractional markets. Said another way, when the confetti has been cleared from the field and the Super Bowl parades are over, fractional demand may shift its gaze elsewhere, with selling activity driving the bulk of volume in the space.
Most assets, regardless of sport, experienced their peaks in the winter or spring of this year; most commonly, the peak was after football season concluded and in the lead up to baseball season, so performance from peak is a reasonable metric to better understand magnitude of drawdown. If an asset didn’t begin trading until late spring or early summer, its peak was likely either its IPO price or shortly after its first trade.
On average, through the end of July, football related assets are off 19% from their peak. Cards specifically are down nearly 20%.
Consider baseball, which, since the peak of most fractional and sports card assets occurred, has begun its season and is now past the All-Star break. On average, fractional baseball assets are down just 16% from their peak, with cards down just 14%. It warrants noting, though, that it’s actually the cards of former players that have held up the average return. The cards of former baseball players are down just 12% off their peak on average, versus -19% for active players. The schism is narrower in football, with former players down 18% from peak on average, versus 21% for active players. Both numbers though show that the sport is worse off than its in-season counterpart.
This follows intuitively. You would expect the assets associated with established greats, which also have longer track records, to be less volatile than those of still active players. We know from this weekend's Trades and Trends that vintage cards have thus far outperformed their more modern counterparts across fractional, and in a volatile environment, that makes sense. It's akin to the risk profile categorization Masterworks utilizes for assets on the platform: though there are other additional criteria, those assets with an A or reduced risk profile have the longest track records and the highest average sale prices, and the estimated variability of their returns is predicted to be lower over time. With vintage baseball boasting the longest track record and well demonstrated grail status, it's not a surprise to see that they've not only weathered the downturn with greater stability, but also gained ground as the public returned their attention to America's pastime.
On both counts though - active and former - football, now out of season, has performed worse than in-season baseball. It should be further observed that since March 31st, the day before MLB Opening Day, baseball cards that were already trading or have launched since carry a flat average return of 0%, while football cards are down 9% by the same criteria. That's a sizable difference.
But so what?
It merits emphasizing that the sample sizes here are small, and we’ll be much better served to make a more rigorous judgment with years’ worth of fractional data. But the reality is, by the time we (fractional market participants on the whole) have that wealth of data, fractional markets will be vastly more efficient than they are today. If there are advantages to be gained by being among a smaller pool of buyers in the offseason, then smart money will discover those advantages and eventually they’ll cease to exist. Demand will rise to meet what was previously outsized selling pressure, and the dips won’t be nearly as pronounced relative to the rest of the market.
Today though, markets are anything but efficient, even if they're improving in that regard everyday. So until any arbitrage opportunities wash away, you can be sure that we'll be keeping a close eye on trends and irregularities such as the ones covered here. Will the data reflect a similar lapse in attention for NBA assets, or will the sport's unrivaled offseason drama keep them in the spotlight and in portfolios? (Sidenote: if there was a Woj Rookie Patch Autograph, would it pop every offseason? Or tank when he gets outscooped by Shams?)
As we now sit in early August, training camps are heating up across the nation, and we slowly find football stepping back into the limelight and to the forefront of American sports consciousness. The record sale of the Mahomes Shield card in late July catalyzed returning attention, Collectable's offering of the Laundry Tag Mahomes sister card has sustained that momentum, and now we have a sizable buyout offer for the Flawless Veteran Brady Basket (at 118% over last traded!). The lull may have been short-lived.
After all, why should shares in Tom Brady cards dip more than the market when, as sure as the sun will rise tomorrow, he'll win another Super Bowl next season.
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