Welcome to the second 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, and don't forget to subscribe to Pro for a look at an even larger slate of offerings!
Cultural relevance. From the fame gained through her tennis talent to opening more eyes to mental health challenges, Osaka has taken a lead role as a fundamental piece among the next generation of athletes. At just 24 years old, Osaka has won four grand slam titles, securing wins at the Australian and US Open twice each. She reached the top of the WTA rankings, and lit the cauldron in Tokyo to kick-off the most recent Olympic games. Osaka has also made the TIME 100 list each of the last three years and looks to be the tennis star who will take the torch from Serena Williams as the face of the sport. She has also developed a strong social media presence with 2.8 million followers, placing her within the top five among active tennis players.
Could tennis be primed for a breakout? In 2021, ESPN reported that the US Open garnered 881,000 viewers during peak prime time slots, which was a 33% year over year increase. Viewership numbers are still down from 2019, when they peaked above 1.2 million, but the 2021 performance marked the second time the sport crossed over the 800,000 threshold in five years. Adding to the recent rebound (or volley - tennis joke), Netflix announced a behind-the-scenes series that will follow the ATP and WTA Tours. Filming for the show is already underway in Melbourne for the Australian Open and while a release date has yet to be confirmed, the concept seems similar to the F1 docuseries ‘Drive to Survive’, which is credited for bringing more attention to the international racing circuit.
Show me the money. For the second consecutive year, Osaka was the highest-earning female athlete in the world with over $57 million in total earnings. That also places her 2nd among all male tennis players behind only Roger Federer who raked in $87 million last year alone. What is most impressive about Osaka’s financial proceeds is how little of it came from her earnings on the tennis court. Nearly 96%, or $55 million out of her $57 million, came via sponsorships with global brands. Deals with companies like Louis Vuitton, Mastercard, Nike, Sweetgreen, and Tag Heuer have helped propel Osaka up the Forbes rankings, even while her WTA ranking fell from 2nd to 13th.
Bear Case
It is a different world today than yesterday. There were multiple PSA 8 graded examples sold in 2020 for less than $400 and then in 2021, PWCC sold a PSA 9 for $13,400 which completely reestablished the market. The $13,400 sale came out of nowhere and most importantly, occurred under much different circumstances. When the card sold in February it was the only PSA 9 with none graded higher. Today, there is a graded population of 43 cards, with one PSA 10 and six PSA 9’s. When the PWCC sale closed, the PSA 9 sold was the top copy on the market. When Rally’s PSA 9 opens to investors this week, it is still one of the highest graded examples but is now in the top 16% instead of the top 1%. The Osaka market is changing so fast that when this card made its first appearance in Rally’s SEC filings, there were only five PSA 9’s and the PSA 10 had not been graded yet.
Tennis trails the field. In a market where six-figure prices are now commonplace and seven-figure sales no longer turn heads, tennis is still looking for its first $100K card. Serena Williams cards have demonstrated strong returns in the last year as a 2003 NetPro Apparel Auto card sold for $44,280 in October and then a Elite Glossy card set a new record with a $55,200 sale this month, but there is one really important factor - it’s Serena Williams. Osaka’s career is off to a great start, but it is unfair to compare her card prices to the most dominant athlete to ever pick up a tennis racquet. While it looks like it will take a numbered Serena rookie card to finally break down the six-figure barrier, other names like Osaka, Barty, and Kenin have yet to establish themselves within the card world, with the exception of one Osaka sale. Until a Serena card breaks six-figures and a young star emerges with consistent price appreciation, there will also be a relatively low ceiling for tennis cardboard while other sports see a consistent flow of high profile sales.
Will Osaka return to the top in 2022? This is a factor that will play out in real-time, and the first rendition of 2022 is taking place over the next couple of weeks in the country down-under. Osaka is the 13th seed at the Australian Open and cruised to a first round win on January 16th over Camila Osorio. Even with her lower than usual seed, Osaka carries the second-best odds to win the Aussie Open title at 15-2, behind Ashleigh Barty who closed the weekend at 11-4. Osaka had a down year in 2021 and will need to right the ship soon or card prices could suffer. The Australian Open is key for Osaka who has shown favoritism towards hard court surfaces compared to the French Open and Wimbledon which are played on clay and grass respectively. With only one five-figure sale to date, if Osaka is unable to replicate her early career success, the door could open for a different young tennis star to emerge as the choice among collectors and investors.
1970-71 Bobby Orr Photomatched Jersey - Collectable
Photo: Collectable
Early Access (official opening not clear)
Valuation: $399,000
Bull Case
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.
Bear Case
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.
Pierce Brosnan’s Omega Seamaster (James Bond Film Worn) - Rally
Photo: Rally
1/20 @ 12:00 PM ET
Valuation: $80,000
Bull Case
An iconic, stylish franchise. The Bond film franchise has spanned seven different decades and 25 movies, grossing over $7.8 billion at the box office. If you were to adjust that number for inflation, it would be well over $15 billion. The Bond character has been considered a style icon for as long as the franchise has existed, and the character began wearing an Omega wristwatch in the 1995 film, Goldeneye - a choice the brand did not have to pay for. Since, Omega watches have appeared on Bond in every film, most frequently a Seamaster Diver 300M Professional. It is now almost unfathomable to think of 007 without his Omega Seamaster, making a movie-worn piece a compelling offering for those bullish on the franchise’s cultural longevity and movie memorabilia more broadly. There is a history of Bond memorabilia drawing six figures at auction, even at the most esteemed auction houses. For example, Sean Connery’s pistol from promotional images for From Russia with Love sold for £277,250 at Christie’s in 2013, a 28% annual improvement since its prior sale in 2001. In 2020, Dr. No costar Ursula Andress’s bikini sold for an estimated €360,000, up from £41,125 in 2001.
The Millenial’s Bond. While perhaps not the best reviewed and broadly beloved Bond, Pierce Brosnan is a particularly relevant Bond for a generation well suited to collect and invest. The Millennial generation carries a fondness for Brosnan’s bond, who appeared in movies throughout the nineties and early into the new millennium. That attachment is strengthened by the actor serving as Bond when GoldenEye 007 for Nintendo 64 debuted. That asset on Rally is up 100% since IPO and is reflective of the, well, bond between that era’s 007 and those active on the platform.
Steady fractional watch performance. Watches offered on Rally have performed well to date, even if returns are more muted than some more high flying categories. The average since IPO return is 22% as of 1/13, and the worst performing asset, the slow-filing Tornek Rayville is down just 20%. As far as fractional drawdowns go, that’s relatively muted, and the maturity and efficiency of the watch market has meant lower volatility as a fractional asset class to date. In our October study of fractional volatility, luxury items ranked as fourth least volatile, and the volatility was likely heightened by the inclusion of Birkin bags, which have been prone to larger swings. Of course, that this is also principally a piece of memorabilia may change the performance profile.
Bear Case
Muted Returns. This particular watch sold in 2007 at Swiss watch auctioneer, Antiquorum, garnering $58,369 USD. Rally purchased it at Bonham’s in November for $68,881 (per Bonham’s). Over the fourteen and a half years between sales, that’s an annualized return of just over 1%. While the introduction to an appropriately aged fractional audience may boost interest, that low return profile would prove difficult to ignore for a bearish investor.
Low rated Bond & movie. Though Brosnan may be fondly regarded by millennials, his Bond and the films in which he appeared were not particularly well regarded, especially outside of Goldeneye. The film in which Brosnan wore this watch, The World is Not Enough, received a 52% critics score and a 49% audience score on Rotten Tomatoes (not necessarily a bastion of movie-critic perfection, but helpful for data points nonetheless). That places it in the bottom 25% of Bond movies. The average critics score for Brosnan Bond movies is 61%, and the average audience score is 56.5%. Contrast that to Sean Connery (86% and 75%) and Daniel Craig (79% and 64%), and it’s easy to see how Brosnan and his films may not make for the most iconic, coveted, and sought-after memorabilia. But we also have auction examples to support this. In December 2020, Sean Connery’s film-used pistol from Dr. No sold for $256,000 at Julien’s. That same month, Pierce Brosnan’s film-used pistol with silencer and holster from Goldeneye went unsold at PropStore, with an estimate of £40,000 - £60,000. That was the second time it went unsold, failing to sell with the same estimate in April of 2019.
Wide range of fractional Bond outcomes. As outlined above, there are fractional performance reasons to be bullish, but though they are not directly comparable, there are also reasons to be less encouraged. The three Bond book offerings on Rally have an average ROI of -21.4%. While GoldenEye 007 is up 100%, a bearish investor would be more likely to attribute this to broader video game strength and unlikely to see this trend carrying over to a piece of memorabilia with fewer and less frequent comparable sales. Assets without those data points have been prone to large and inexplicable drawdowns in trading in moments of volatility. Many existing fractional watches benefit from regular, direct comps, or at minimum, highly relevant data points that assist in maintaining their range-bound status and providing floor prices.
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