Fanatics buys PWCC

[Triple B]

I admit I didn’t see this one coming…

https://www.sportscollectorsdaily.com/pwcc-marketplace-sold-to-fanatics/

Of note:

The vault was based in Oregon, which is one of five states without statewide sales tax. While the vault concept may have been PWCC’s star for a short while, it may have also precipitated its downfall.

At the height of the card craze, vault members were allowed to take out loans against their vaulted cards, using those cards as collateral.

That helped light the card market on fire as some of those people then took their loan money to buy more.

But when the market plummeted, there were enough of those people who just said, “I’ll keep my money, you keep my cards.”

From Twitter, this was pointed out:

@darrenrovell
Couple more notes on Fanatics acquisition of PWCC....

Lending program went south when enough high end collectors said they'd give PWCC their cards in the vault and keep the $ that was loaned.

PWCC would not have survived much longer without being bought.

 

[SNobles]

Wow that’s interesting.

 

[langway05]

Like Ryan said it was pretty well inevitable.

 

[BrookIsland]

I mean how do they not have the ability to do a margin call with direct access to a bank account with a personal guarantee etc. etc. well before then and/or use v v basic risk management tools (or e.g., not do crazy LTVs)...

 

[Triple B]

I mean how do they not have the ability to do a margin call with direct access to a bank account with a personal guarantee etc. etc. well before then and/or use v v basic risk management tools (or e.g., not do crazy LTVs)...

They wildly overestimated the market either foolishly or with suicidal tendencies. I'm leaning towards the former, even though they had more than enough heat on them.

 

[quincy]

I read that with the same astonishment at the lack of basic financial precautions as I do stories of FTX.

 

[weasel-king]

What's the play here? You don't buy a company just to keep them from going bankrupt when they are not a direct competitor or helper. Does this mean Fanatics just wanted a vault "feature" to add to their portfolio?

 

[will-411]

What's the play here? You don't buy a company just to keep them from going bankrupt when they are not a direct competitor or helper. Does this mean Fanatics just wanted a vault "feature" to add to their portfolio?

I am woefully uninformed when it come to any of this, but my first thought would be they'll own all of the Vault inventory people abandoned, and likely at a fraction of the value that PWCC valued them at, but likely at current or less than current market value. PWCC also has market share in the auction industry... and is a recognized name in different aspects of the hobby that Fanatics doesn't already have... I'm guessing the Fanatics heads saw something of value here.

Given everything that Fanatics has bought in the hobby industry recently, I wonder if they're part of one of the bidding groups for the Senators? lol

Cory

 

[quincy]

PWCC also has market share in the auction industry... and is a recognized name in different aspects of the hobby that Fanatics doesn't already have... I'm guessing the Fanatics heads saw something of value here.

I think this is correct. Owning a recognized brand that targets a valuable collecting niche across multiple sports for a fraction of what it might have cost? Solid pickup. Not dissimilar to the conditions under which they bought Topps - and their MASSIVE footprint in the major sports - for comparatively little.

 

[deepbluejacket]

At what point do they trigger anti-trust concerns from the government? Exclusivity deals are already shady. but this is getting out of hand.

 

[will-411]

At what point do they trigger anti-trust concerns from the government? Exclusivity deals are already shady. but this is getting out of hand.

I'm guessing not until they somehow leverage the breadth of their holdings into something more than the parts they are, and someone with important friends gets burned.

Cory

 

[quincy]

...and someone with important friends gets burned.

Or annoyed or inconvenienced. This is the crucial part of your analysis, which is spot on.

 

[Triple B]

Giving each league an ownership stake has its privileges.

 

[katoy2j]

There won't be any possible anti trust issues with sports cards. The reality is that the market is so small that nobody really cares. When you factor in that each sport pretty much is it's own entity anyways the majority have all ready been a monopoly in the respective sports.

This won't end well with Fanatics. It's going to be years away but they are unlikely to survive as it's current entity. They have so much debt and are the equivalent of a Home equity line of credit at this point. Interest rates are super high and that crushes companies like this. The majority of their acquisitions are unlikely to be accretive. They are simply in growth at any cost mode with the end goal to IPO and then investment firms will cash out and retail investors will be left holding the bag.

 

[quincy]

Debt nothing. They’re being funded by a billionaire, reportedly.

 

[katoy2j]

Debt nothing. They’re being funded by a billionaire, reportedly.

They are perpetually raising capital through new funding rounds and the last round put the company at a valuation of 31 billion dollars. 10% of Fanatics is owned by the NFL. The backers are not there to prevent Fanatics from going under. They are there to get a return on their investment. Once they see the growth nearing the end they all unload their equity. Soon after that the value begins to erode. They have very little actual intellectual property as everything is licensed. Upper Deck didn't play close to anything near 500 million to buy the O-Pee-Chee brand. Without the licenses the Topps brand really isn't worth much of anything to anyone if they can't make licensed cards.

The big bet for Fanatics is online gambling but they are very late to the market and where they are likely to run into regulation is if the pro sports leagues who are backing fanatics are forced to divest because of possible conflict of interests.

 

[quincy]

Katoy, you're describing what I've said all along: This is a rollup. The debt isn't relevant at this point. I agree with you that this is all going to end very badly for them.