Bull Case Bear Case: The Week of January 10th (Pro Edition)
January 11, 2022
By
Dylan Dittrich, Bradley Calleja
Share
Welcome to the inaugural edition of Bull Case Bear Case by Altan Insights! In this series, we’ll arm fractional investors with the necessary context to make informed choices on select offerings launching in the week ahead.
The intent is not to provide recommendations, but rather to present investors with a look at both sides of the coin. If an investor is bullish on an offering, what are the key points they might reference to support that thesis? If an investor is inclined to pass, what would be their reasons for concern?
We’ll aim to make a robust, but concise case on both sides, highlighting opportunities and risks both in the near and longer term. In the interest of avoiding redundancy (and a tedious read), we won’t highlight all-applicable, overarching market risks and tailwinds for every asset. For example, you won’t find this in every asset’s analysis: “collectible assets are speculative in nature as investments, and absent underlying cash flows, valuations are prone to severe fluctuation and potential drawdowns at the whims of supply and demand.” A highly sound point that absolutely bears heeding, but perhaps not one that needs reading multiple times in short order.
Feel free to use this tool as you see fit. It can be a starting point for further research, or it can be used to challenge or reinforce existing assumptions and preconceived notions. Our goal is to be as balanced as possible so that you, the investor, can efficiently and effectively prepare for upcoming offerings and ultimately decide where you shake out.
A selection of offerings will be available for free each week, with analysis on additional offerings available to our Altan Insights Pro Plan members. We have a feeling you won’t want to miss those! We expect to see more IPOs than ever before in 2022, and anything you can do to get sharper and to save time preparing will be a distinct advantage over the field. Don’t forget, you receive seven days of free access when you upgrade to Pro.
Now, without further ado, welcome the Altan Insights team onto both of your shoulders, because we have bull cases and bear cases to share.
Collectable
1989 Upper Deck Ken Griffey Jr (SGC 10 Gold Label)
IPO: 1/11 @ 2:30pm ET
Market Cap: $15,500
Bull Case
Unparalleled millennial relevance. For a generation coming into greater wealth and peak earning years, there is no more culturally relevant baseball player than Ken Griffey Jr. Simply put, the “Kid” was possibly the coolest athlete in existence to children of the 80s and 90s, for some even going toe-to-toe with the always anomalous Michael Jordan. The backwards hat-wearing, sweet-swinging, wall-climbing Junior was as emulated a star as any, and it would stand to reason that the kids who grew up admiring him would seek his top tier cards and memorabilia in the years ahead.
Ultra-high grade scarcity. Though the card has an incredibly high population (more on that in bear case), this example’s status as a Gold Label SGC 10 Pristine card puts it in the top 0.08% of the SGC population of 9,599. There are just eight cards that have attained that grade, which is an indication of “virtually flawless” condition. Compare that to 3,988 PSA 10s and 113 BGS 10s. The only rarer standing would be a BGS Black Label, of which there are just 4 examples, though regular BGS 10s still garner more value.
Low frequency of sales. The rarity of these pristine Griffey examples may make them an attractive buyout candidate given the dearth of sales. We have not located record of another sale since June of 2020. Should demand for modern SGC and comparable value for modern SGC improve, the appeal of this example would stand to benefit.
No cash sourcing fee. Collectable paid $15,500 in cash for this offering and is not taking a cash sourcing fee according to the offering circular. In fact, as they are offering the asset at $15,500, the cash sourcing fee is likely negative.
Bear Case
High multiple to PSA 10s. The valuation at $15,500 pegs the SGC Gold Label card at a roughly 7x multiple to PSA 10s. While Gold Label SGC 10 sales from this era are infrequent, this would place the card at the very high end of a range that we see for cards of similar era and population. Specific to this card, the last time a Gold Label SGC 10 sold at auction at the same time as a PSA 10 was June of 2020, and the multiple ranged from 2.6-2.8x. Significant time has passed since, and the market today is not the same as it was then, but it bears noting nonetheless.
High equity sourcing fee, dampened buyout returns. Because Collectable has not taken a cash sourcing fee, according to the offering circular, they have taken a larger equity sourcing fee than is typical (10% vs. 8%). In the event of a successful buyout, this means that net payout to shareholders is diluted more. For instance, a $20,000 buyout would be spread over 1705 shares, netting shareholders $11.73 per share, or a 17.3% return versus the 29% headline, gross return. If the sourcing fee was the typical 8% equity, the return to shareholders would be estimated to be 19.5%.
Junk wax poster child. Simply put, this is one of the most graded cards of all time. It is one of the flag-bearers of the junk wax era: the card that everyone chased, thought was rare, and ultimately discovered was produced in mass quantities. There are 9,599 SGC copies, 38,604 BGS copies, and 85,693 PSA copies. PSA has additionally graded 862 signed copies, 41 of which are PSA 10s. Ultimately, these signed copies, BGS 10 Black Labels, and BGS 10s may prove more coveted by collectors. Right or wrong, many collectors do not believe the SGC brand carries demonstrably comparable weight to competitors at the high end of the modern card market. As such, fractional investors that share that opinion may find superior value in the BGS 10 example trading on Rally at a ~$20k valuation.
Brady NFL Debut Ticket (PSA 7)
IPO: 1/12 @ 2:30pm ET
Market Cap: $107,750
Bull Case
True scarcity. Despite being a relatively modern debutant, because of Brady’s lack of relevance upon entering the NFL, populations of his debut ticket are actually quite low. Between full tickets and stubs, signed and not, there are just 26 examples that have passed through PSA. Contrast that to 15 slabbed stubs for Mickey Mantle’s debut nearly 50 years earlier, 10 for Wayne Gretzky’s debut 21 years earlier, and 30 for Michael Jordan’s debut sixteen years earlier. A slightly more anticipated debut, that of LeBron James three years later, has 76 full tickets and stubs in the PSA population.
Ticket market appreciation. The collectible ticket market experienced an incredibly prosperous 2021, with eight of the top ten sales of all time taking place over the course of the year. Some would argue that the space is still due further inflows from collector and investor wallets relative to the card space, given the low populations and true scarcity at hand. Between PSA 10 and BGS 10 copies of Brady’s 2000 SP Authentic rookie cards, there is a population of 111 cards. Those cards routinely command six figures (more recently nearer to $150k in the case of PSA 10s), putting them at a premium to the debut ticket despite a population 4x the size and despite the existence of other, more desirable Brady rookie cards. If you are a believer in the overall ticket value proposition relative to cards, the valuation here is more easily digested.
Path to current valuation. When a signed Brady ticket (graded PSA 6) sold for $73k in October, it achieved a multiple of approximately 10x to a PSA 8 signed example from September of 2020. Collectable’s ticket sold in August of 2020 for $11k. This is highly imperfect, particularly in a rapidly developing ticket market where multiples mean little, but if you were to apply the same multiple of appreciation, you can see a path to the IPO value in the short term and begin to focus on the longer term outlook, which a bullish investor views favorably for tickets. Bullish investors will also point to the $144k sale at Heritage in November of a signed ticket to the game in which he threw his first touchdown pass. Of course, that game is a lower population, the ticket is signed, and it is a PSA 10, but should the debut carry more value?
Bear Case
More desireable tickets in existence. There is a not insignificant population of Brady signed and inscribed tickets from this game. There are, in fact, more PSA/DNA authenticated full tickets from the game than there are unsigned full tickets (8 vs. 6). While this is the second highest graded full ticket, it may rank further down the stack in terms of desirability of tickets from the game. Gretzky, Jordan, and Mantle unsigned debuts have achieved six figure sales. However, there exist only two PSA-graded signed Gretzky debut stubs (both with qualifiers), and there are no signed stubs from either the Jordan or Mantle debuts.
Premium to signed record. The high sale for a Brady debut ticket is for a signed debut ticket, graded a PSA 6 with auto graded PSA/DNA 10, for $73,200 in October of 2021. While that result was approximately 10x the sale of a PSA 8 signed example in September of 2020, and applying a similar multiple to the sale of Collectable’s ticket in August of 2020 for $11k would get you to the IPO value, investors may still be likely to balk at the premium to the current high watermark for a signed ticket to the game. Additionally, as covered above, the use of multiples is far less reliable in the rapidly developing ticket market than it is in the more established sports card market.
New, potentially volatile asset class. While tickets have seen massive appreciation in value over the last year, the asset class remains relatively inefficient, with price discovery still occurring among different assets and grades as collectors and speculators alike grab at assets. This environment introduces the chance of high volatility both for the category itself and for assets within.
Oscar Robertson Game-Worn Rookie Jersey
IPO: 1/13 @ 2:30pm ET
Market Cap: $268,500
Bull Case
All around, underappreciated legend. Oscar Robertson is perhaps one of the more underrated and undermentioned NBA superstars of all time. His resume: 7th all time in assists, 3rd all time in assists per game, 15th all time in points, 9th all time in points per game, 87th all time in rebounds (as a guard), 12th all time in win shares, 4th all time in offensive win shares, and 2nd all time in triple doubles. He was simply one of the best all-around NBA players of all time, and his rookie season in particular, in which he averaged 30.5, 10.5, and 9.7 – nearly a triple double – is among the best ever.
Consignor sees upside. The consignor has kept nearly 42% of the equity in the jersey. While many in the fractional community frown upon retained equity (see bear case), there is an alignment of incentive at the $268,500 valuation, as the consignor believes there is upside from there (otherwise they would have sold the asset in its entirety).
Favorable market trends. There are no comparable sales of rookie Robertson memorabilia. The highest Robertson uniform sale to date was for the full uniform from his Gold Medal winning game at the Olympics in 1960 (with direct Robertson provenance). That sold for $146,558 at SCP Auctions in April of 2019. Since then, Robertson’s 1961 Fleer Rookie card has increased in value by approximately 3.5x. In 2015, a MEARS A10 jersey from Robertson's 1963 MVP season sold for $57,360 at Heritage. Whether that jersey is on equal footing with a rookie jersey is somewhat subjective, but obviously, the card market has 10X'd or more in some areas since. Of course, memorabilia has lagged cards significantly in recent market appreciation, which is worth keeping in mind. Wilt Chamberlain’s Rookie Uniform on Collectable is valued at $2.55mm at present. It is critically important to note that the uniform is photo-matched by Mei Gray. But for another frame of reference, Wilt’s 1961 Fleer Rookie in PSA 9 condition is worth 4-5x Robertson’s card.
Bear Case
Forever underappreciated? One could ask the question that if Robertson remains underrated today, particularly after his triple double prowess came into focus through Russell Westbrook’s accomplishments, what will change to make him appropriately rated and valued? Some feel that Westbrook’s achievement, in tandem with his current struggles and lack of team success, has devalued Robertson’s accomplishments. It also bears noting that despite that insane resume, Robertson won just one MVP award. Again, the comparable statistical profile to Westbrook – even if the two were different players – may make it difficult for those that didn’t see Robertson play to delineate and to assign him more fitting value.
Uncharted valuation waters. At this valuation, this jersey is the most expensive piece of Robertson memorabilia in existence, clearing the MVP Trophy sold by SCP Auctions in 2012 for $178k by some distance. A jersey photo-matched to Robertson’s last NBA season and his jersey retirement was sold by Heritage in 2020 for $63,000. It’s noted in the description that this jersey was also photo-matched to an NBA Finals Game, though it’s worth noting that the photo used did not meet Mei-Gray’s standards and that match was done after Mei-Gray’s analysis, which may explain the ultimate result. A Jordan rookie jersey, similarly graded MEARS A10 and not photo-matched, sold at SCP Auctions this summer for $125,332 (though do note that a greater quantity of Jordan rookie jerseys have surfaced at auction in comparison to none for Robertson). Jordan is not a terrific comp (he rarely is), but the data point is purely included for reference/weighing purposes, particularly given the non photo-matched, unsigned, MEARS A10 status. Another MEARS A10 rookie uniform sold at Heritage this summer, this one for a more encouraging $216,000. The rookie? Larry Bird. Robertson may have the superior resume in many areas, but certainly an investor bearish on this offering would emphasize the perception and appeal of Bird in leaning in favor of the rookie uniform of Larry Legend at the markedly lower valuation.
Limited shareholder buyout influence. The consignor will retain 41.9% of equity. As such, in the event of a buyout offer, nearly 88% of other shareholders will need to vote in a certain direction in order to prevail if that decision is in opposition to the vote of the consignor.
Rally
I, Robot (1st Edition)
IPO: 1/11 @ 12:00pm ET
Market Cap: $8,000
Bull Case
Increasingly relevant subject matter. Asimov, I, Robot, and Asimov’s entire Robot seriesare credited as standard-setting in science fiction, influencing countless future works of literature, film, music, and television. The most lasting inspiration comes from the book’s Three Laws of Robotics. In an era where the human relationship with and exploration of artificial intelligence advances daily, the book may become increasingly relevant, particularly given its groundbreaking ruminations on the ethics of those matters.
Standout condition. Rally’s book is in near-fine condition, and while first edition copies do surface with reasonable frequency at auction, it’s quite rare to find copies with a dust jacket as visually appealing as this example, which has retained its color well. More typically, dust jackets see rubbing and sunning, particularly to the spine, that diminish the rich red color seen here. There is some minor bumping to the corners, pushing to the spine, and chipping to the jacket, but overall visual appeal is superior to most copies, though it does trail the very fine copy sold at Christie’s for $10,000 in September, even if only narrowly. The condition of the dust jacket is superior to the copy sold at Gorridges for a USD equivalent of $5,092 in October.
Incredible fractional book performance. Books with an IPO market cap under $20k have a staggering average IPO since inception of 120% as of 1/6/21. Of the eleven such books to IPO on Rally, eight have achieved triple digit (!) returns to date. This is the second lowest IPO value for a book to date and just the second less than $10k.
Bear Case
Population of more desirable copies. While this copy stands out for its strong condition, high-end collectors may be more drawn to signed or inscribed copies, or better yet presentation copies, albeit in lesser condition. There types of first edition copies have sold at auction with some regularity, and they are the ones that have typically captured values approaching five digits. The $6,250 sale at Swann in 2018, for example, did include the author's signature.
Priced-in growth? The asset was purchased for $5,000 at Heritage in October, and some might therefore infer that the $10k sale at Christie’s in September was somewhat flukey, particularly in light of the broader strength in results at that auction. The market may more realistically lie in the mid four digit range, given the typically slow appreciation of the book market and the majority of sales in the 2010s clustering in the low-to-mid four digits.
Relatively high sourcing fee. Though the sourcing fee is $1,820, a nominally smaller number to be sure, at 22.75% of the offering value, that’s a relatively high fee compared to other offerings. We would put a greater emphasis on sourcing fee versus pure markup, as sourcing fee is the largely discretionary component. Line items like brokerage fees, transport costs, and offering expenses are less influenced by the marketplaces and more representative of the costs of bringing an item to market, and the cash on balance sheet belongs to the shareholders and is necessary for potential, ongoing future expenses. Investors should not necessarily expect that sourcing fees be zero either - the marketplaces are businesses providing a service (the democratization of assets most could not otherwise participate in and the ongoing marketing and facilitation of ownership thereof). Investors should, however, be aware when a sourcing fee is nominally high or high as a percentage of the offering, and they can take this into consideration in making an investment decision, particularly in the context of whether that fee stretches the topline valuation beyond attractive or palatable entry levels.
2017 Playstation 4 Fortnite (WATA 9.8 A+)
IPO: 1/12 @ 12:00pm ET
Market Cap: $16,000
Bull Case
Remarkable franchise growth. Fortnite is one of the fastest growing entertainment franchises in existence, debuting in 2017 and quickly garnering an audience of 125 million players within a year’s time. Fortnite accounts for the vast majority of Epic Games’ revenue, which totaled $5.1 billion in 2020. Contrast that to $5.5 billion and $3.1 billion respectively for the more mature and recognized companies Electronic Arts and Take Two. As of 2021, the game has 350 million users. Three hundred. And fifty. Million.
Unique scarcity drivers. Because Fortnite is free-to-play, essentially all users acquired the game via digital download, rather than purchasing a physical copy. Additionally, the relatively underwhelming performance of game mode “Save the World” ensured lower print runs - the wildly successful Battle Royale mode had not yet been introduced when the physical copies were produced. As a result, relative to other popular games, its expected that the proliferation of physical copies was significantly limited, and therefore the population of sealed games is similarly believed to be low.
Long term appreciation potential. Over the long term, the thesis for a bullish investor would be for the debut of the Fortnite series to rival other series debuts in value. Highly-graded debut copies of series like Resident Evil, Final Fantasy, and Tomb Raider have attained six figure auction results in the last year. The question is whether the scarcity of Fortnite’s unique physical production circumstances will ultimately rival the natural scarcity created by the passage of time for other games.
Asymmetric return profile on low market cap game. Rally purchased this game at Heritage Auctions in October for $13,200. That result represents a decline from the high price for a copy of Fortnite, which was $18,000 for a 9.6 A+ in July - at the height of video game fervor. This game was purchased after significant steam escaped the market (though it’s important to zoom out and note that the decline took place in the context of a runup from prices in the mid-to-high thousands earlier in the year). At $13,200, the risk profile may appear asymmetric: while, like any game, it could go to effectively zero, a bullish investor believing in the long-term appeal of the franchise and constrained supply of its debut might be willing to embrace that risk for the possibility of a successful outcome multiples higher. Video Games with an IPO market cap $50k and under have an average since inception return of 71% (strongly influenced by Halo Combat Evolved and Super Mario 3 on Otis).
Bear Case
Population uncertainty. Population for the game is somewhat of a mystery, and that is likely to remain the case for some time. WATA has released an NES population report at the end of 2021, with other consoles to follow, but the likelihood is that PS4 and Xbox One are not likely to be early in that queue. We do know that there have been over 80 recorded sales of sealed copies of the game on eBay in the last year. While perhaps not all of those are legitimate, consummated sales, we can assume that a significant portion is legitimate and that those copies were undoubtedly bought for collecting purposes since the game is free to download. That being the case, expect an increase in graded population. There are presently at this point alone three other WATA 9.8 copies available for sale on eBay.
Undigested supply. The potential of this game as a collectible is not a “new” concept invigorated by video game auction results in 2021. The values of sealed copies of Fortnite began making headlines in 2018 and 2019 for the astronomical heights reached (hundreds of dollars - gasp!). The appreciation in value since has of course been immense, but the fact that collectors have been chasing and hoarding sealed copies for collection’s sake for years may introduce questions about whether or not supply truly has been digested or if there is an unforeseen glut created by early suspicions of collectible value.
No market history for PS4 games. Rally’s purchase of the game at Heritage Auctions in October for $13,200 is the highest price ever paid for a PS4 game at Heritage…by about $12.8k. The video game market itself is nascent (a risk itself), but the market for sealed PS4 and Xbox One games as collectibles has not at all developed yet. There is still considerable price and supply discovery to be undergone, and while there have been multiple five figure sales of this game, the market seems to be guessing and pricing in the future growth that has been afforded to other significant, earlier titles. These dynamics make this a speculative long term bet.
Strong catalyst potential. Is there any piece of cardboard that has a bigger potential catalyst in January than an Aaron Rodgers rookie card? The star quarterback is the front runner for league MVP, sitting at -500 odds across most sportsbooks, and the Green Bay Packers will head into the postseason as the number one seed in the NFC. In their latest ranking, NFL.com named Aaron Rodgers the 10th best quarterback in league history. On that list, Rodgers was positioned behind names like Peyton Manning, Joe Montana, Roger Staubach, and John Elway - all players with more than one Super Bowl victory. While it is difficult to estimate how high a second title could lift Rodgers, both in the rankings and on the card market, there is little question the additional accolades and rings would further cement his legacy as a top-5 passer.
Print and grade scarcity. This card combines scarcity with gem mint quality, two features that are pursued by collectors and investors alike. From a print run of 99, there have been 70 examples graded by Beckett and 12 that have earned a 9.5. This particular card carries a 9.4 subgrade average but none of the BGS 9.5’s have a subgrade average above 9.5, which means any gem mint example comp is relevant, and there is not necessarily a tier within the population of 9.5’s.
Recovering market. Similar to other modern football cards, prices for Aaron Rodgers rookies have experienced an impressive trajectory over the last two years, with base cards increasing in price by 85-100% year over year, while more finite copies, such as this card, have seen their prices improve by 150% or more. After prices pulled back during the summer, sales displayed signs of recovery through the fall that has continued into the winter. Sales data for this /99 example is limited, but mint and gem mint Bowman/Topps Rodgers base cards are currently selling for 30-45% premiums against comparable sales that occurred in August.
Bear Case
Rodgers a laggard. The Aaron Rodgers rookie card market has lagged behind other stars, and there has never been a seven figure sale of any Rodgers card or memorabilia. While his base cards have 5X’d in value since January 2020, they have failed to realize the 8-10X growth found with players like Tom Brady and Patrick Mahomes. After peaking in the spring, prices fell significantly, in line with the rest of the blue chip modern card market, but have failed to recover at the rate of other active quarterbacks. The $56,000 market cap is also the most expensive level this card has reached to date. The $49,999 price paid by Rally to acquire #05RODGERS in August is the highest public sale for this RPA.
No assurances of postseason success. With big expectations comes the potential for big disappointment. Since winning the Super Bowl in 2010, the Packers have failed to return to the big game, despite making the NFC Championship game in four seasons. Can Green Bay traverse a deep NFC and knock off the best from the AFC? In a league and at a position where legacies are directly tied to reaching the pinnacle of the sport, Rodgers will need to guide the Pack to a game that has eluded him for over a decade. If he can't do it this season, the possibility of retirement or an uncertain new football situation puts the reinforcement of the longer term bull case in question.
Questionable cultural appeal. From his estranged family relationship to the recent immunized vs vaccinated debate, controversy has followed Rodgers on and off the field throughout his career. Whether or not that has impacted card and memorabilia values is up for debate, but it surely hasn't helped. While likeability is not necessarily a factor in determining an appraised value or estimating a future value, Rodgers has not helped his cause within select demographics of the sports world, including those within the media.
Directions.com
IPO: 1/14 @ 12:00pm ET
Market Cap: $140,000
Bull Case
High-end domain name demand remains strong. Demand for high end, top quality domain names improved considerably in 2021, remaining robust. The floor price of the top 100 sales of the year increased by 90% over 2020 and 2019, according to DN journal, and the average sales price within the top 100 increased 225% over 2020. Your Twitter feed might be filled with .eth acquisitions and metaverse land sales information, but to the mainstream population unconcerned with Web3, buying valuable “land” on the good old fashioned worldwide web remains relevant.
Favorable comps, elevated standing. The following one-word, generic .com domains sold in 2021 in the neighborhood of the Rally market cap for Directions.com: Cows.com ($125,000), Skates.com ($150,000), Mules.com ($150,000), and Chronic.com ($150,000). A bullish investor would likely be inclined to choose Directions over any of these, particularly as search activity for each of these terms pales in comparison to Directions. Generic, one-word .com domains remain among the most very dearly coveted, the market for them is well established, and the supply will not grow.
Revenue generating ability. According to the party who listed the domain at auction in 2020, when it was a parked domain name, Directions.com generated between $200-600/month in revenue, or an average of $387. Annualized to a year, that’s $4,644 in revenue, which would be a yield on the $144,000 offering value of approximately 3.3%. At the high end of the provided range ($600/month), a yield of 5% would be
.jpeg)
.jpeg)
