RallyRd - that old idea about partial ownership of comics is a reality (updated July 21, 2021) 6 6

[valiantman]

5 minutes ago, sfcityduck said:

Because if you think of a comic an "investment," you will start to analyze its value with your head, not your heart, and your head is going to be telling buyers a far different message than their hearts.

We can argue where the line is drawn dollar-wise, but since a reprint is usually $5 or less, I'd say every comic book priced at $5 or more is an investment of some sort... with or without a system that breaks it into shares of ownership.

Edited July 27, 2020 by valiantman

[valiantman]

9 minutes ago, Sweet Lou 14 said:

1 hour ago, valiantman said:

RallyRd bought a Michael Jordan rookie card, offered 1,000 shares for $40 each.  Got an offer for $71,640 for the card, took a vote among shareholders, and sold the card, giving $71.64 in cash for every (originally) $40 share.

Another system (not RallyRd) might do something similar or maybe they would never sell the item, only allowing it to be traded as shares.  No one knows yet.

This sounds great but that can't possibly be the whole story.  There had to have been costs and fees that needed to be deducted from that $71,640.  If you can point to a more detailed accounting of this transaction, I would be curious to see it.

Sold for $80,000 according to legal filings, however, the shareholders were not asked if they were willing to sell for $80,000.  They were asked if they would accept $71.64 per share, and the majority voted to accept.

https://www.sec.gov/Archives/edgar/data/1768126/000176812620000014/series86jordanform1u.htm

[sfcityduck]

53 minutes ago, valiantman said:

Someone suggested just buying shares in Disney instead of shares of Amazing Fantasy #15.  Not at all the same thing.  I didn't spend 30 years collecting comics wanting to own Amazing Fantasy #15 for both pride and investment to say it's "the same thing" to buy shares in a company that owns Spider-Man. 

I completely agree.  But owning a fraction of a share in a minority ownership interest in a comic book is the same to me as owning stock in Marvel or DC.  In neither example do I own a comic book.  I just own an intangible ownership interest.  I can't pull out my comic, show it off, read it, admire it, register it, or anything else if all I got is a fractional interest (especially if a minority interest) with no attributes of possession or control.

[Sweet Lou 14]

19 minutes ago, valiantman said:

Sold for $80,000 according to legal filings, however, the shareholders were not asked if they were willing to sell for $80,000.  They were asked if they would accept $71.64 per share, and the majority voted to accept.

https://www.sec.gov/Archives/edgar/data/1768126/000176812620000014/series86jordanform1u.htm

Thanks for this.  So if I were a shareholder, I would want a clear accounting of where the other $8,360 went -- it's more than 10% of the proceeds.  Which as anyone who's sold a comic book would know, is actually right around what you might expect to give up in sales commissions on a book you own outright.  But if the idea is to open up collecting to a much broader set of investors, this level of overhead may come as a big surprise to the uninitiated.

[bc]

12 minutes ago, valiantman said:

Sold for $80,000 according to legal filings, however, the shareholders were not asked if they were willing to sell for $80,000.  They were asked if they would accept $71.64 per share, and the majority voted to accept.

https://www.sec.gov/Archives/edgar/data/1768126/000176812620000014/series86jordanform1u.htm

From that filing:

 

On June 1, 2020, RSE Archive, LLC, a Delaware limited liability company (the “Company”), sold the Series 1986 Fleer Michael Jordan Card, that is the Underlying Asset for Series #86JORDAN, for $80,000 versus the Series #86JORDAN initial offering price of $40,000. The sale contains no other material terms and conditions. In the case of the Series #86JORDAN the purchaser of the Underlying Asset is a member of the Advisory Board of RSE Markets, Inc. (“RSE Markets”) the asset manager of the Series #86JORDAN.

The asset manager of the Series #86JORDAN, has been elected as liquidator and will distribute to members of Series #86JORDAN all of the remaining assets (which consist only of cash) of Series #86JORDAN, after making provision for taxes and other liabilities of the Series #86JORDAN. For the avoidance of doubt, the liquidator has not withheld any distribution for any taxes related to the gain on the sale for any individual members. After making the distribution payment to members for Series #86JORDAN, net of any outstanding taxes and other liabilities, the manager of Series #86JORDAN intends to terminate and wind up the series because the Series #86JORDAN should no longer have any assets or liabilities.

 

So they originally bought it for FMV+, sold the interests for FMV+ and then sold it to an insider stakeholder at FMV+. Seems entirely sustainable.

If they did actually sell it for $80K and only distributed $71,640 to the interest holders, there goes another 10.45% profit.

Wonder what the over/under % is for the "taxes and other liabilities"?

 

Again, not doubting the concepts potential to bring fractional ownership of high-end collectibles to the everyday consumer market, very concerned about this specific implementation. If this goes sideways, what impact will it have on our hobby when the company that does figure it out finally comes along?

-bc

[sfcityduck]

 

4 minutes ago, bc said:

From that filing:

 

On June 1, 2020, RSE Archive, LLC, a Delaware limited liability company (the “Company”), sold the Series 1986 Fleer Michael Jordan Card, that is the Underlying Asset for Series #86JORDAN, for $80,000 versus the Series #86JORDAN initial offering price of $40,000. The sale contains no other material terms and conditions. In the case of the Series #86JORDAN the purchaser of the Underlying Asset is a member of the Advisory Board of RSE Markets, Inc. (“RSE Markets”) the asset manager of the Series #86JORDAN.

The asset manager of the Series #86JORDAN, has been elected as liquidator and will distribute to members of Series #86JORDAN all of the remaining assets (which consist only of cash) of Series #86JORDAN, after making provision for taxes and other liabilities of the Series #86JORDAN. For the avoidance of doubt, the liquidator has not withheld any distribution for any taxes related to the gain on the sale for any individual members. After making the distribution payment to members for Series #86JORDAN, net of any outstanding taxes and other liabilities, the manager of Series #86JORDAN intends to terminate and wind up the series because the Series #86JORDAN should no longer have any assets or liabilities.

 

So they originally bought it for FMV+, sold the interests for FMV+ and then sold it to an insider stakeholder at FMV+. Seems entirely sustainable.

If they did actually sell it for $80K and only distributed $71,640 to the interest holders, there goes another 10.45% profit.

Wonder what the over/under % is for the "taxes and other liabilities"?

 

Again, not doubting the concepts potential to bring fractional ownership of high-end collectibles to the everyday consumer market, very concerned about this specific implementation. If this goes sideways, what impact will it have on our hobby when the company that does figure it out finally comes along?

-bc

Notable that while taxes were withheld for someone, it was not "taxes related to the gain on the sale for any individual members" (e.g. could have been for the manager's taxes?).  I have not read the prospectus, but it sure seems based on this disclosure that there are costs to the investors that they would not have if they just bought their own collectibles directly from other collectors or dealers.

[bc]

1 minute ago, sfcityduck said:

 

Notable that while taxes were withheld for someone, it was not "taxes related to the gain on the sale for any individual members" (e.g. could have been for the manager's taxes?).  I have not read the prospectus, but it sure seems based on this disclosure that there are costs to the investors that they would not have if they just bought their own collectibles directly from other collectors or dealers.

The same guy who bought the card? 

the purchaser of the Underlying Asset is...the asset manager of the Series #86JORDAN

Double sweet deal for him 

-bc

[sfcityduck]

41 minutes ago, valiantman said:

We can argue where the line is drawn dollar-wise, but since a reprint is usually $5 or less, I'd say every comic book priced at $5 or more is an investment of some sort... with or without a system that breaks it into shares of ownership.

Every comic book acquisition is a "purchase".  I think the term "investing" gets thrown around a little too loosely in this context.  

[batman_fan]

When they sell shares in a collectable, say the Captain America 3, 1000 shares $37 per share.  Does the 1000 shares represent all shares tied to the asset or is it just the number of shares they sold and there are additional shares held by the company?

[sfcityduck]

17 minutes ago, batman_fan said:

When they sell shares in a collectable, say the Captain America 3, 1000 shares $37 per share.  Does the 1000 shares represent all shares tied to the asset or is it just the number of shares they sold and there are additional shares held by the company?

I saw an article which stated the "manager" holds "at least a 10% interest" in each asset.  

[Gatsby77]

I dunno man. So far it seems like a decent way for Metro to move dead inventory quickly at top dollar.

Wonder how much they’re involved in the back-end, either via shares or as silent partner guarantors.

Edited July 28, 2020 by Gatsby77

[batman_fan]

17 minutes ago, sfcityduck said:

I saw an article which stated the "manager" holds "at least a 10% interest" in each asset.  

do you think that is part of the 1000 shares or in addition to?  It matters a ton because it goes to the actual IPO value

[valiantman]

3 hours ago, batman_fan said:

3 hours ago, sfcityduck said:

I saw an article which stated the "manager" holds "at least a 10% interest" in each asset.  

do you think that is part of the 1000 shares or in addition to?  It matters a ton because it goes to the actual IPO value

The 1,000 shares are the total, the manager holds at least 100 of those shares (900 are offered, or fewer than 900, but the total remains 1,000 shares).

Details of what happens with the proceeds are in this document:

https://www.sec.gov/Archives/edgar/data/1768126/000176812620000004/rsea1apos.htm

Captain America #3 is on page 262 (page numbers start after the table of contents as you scroll down).

[PeterPark]

Investment potential, at these buy in amounts, is best realized in lower dollar books. When that is the case, though, just buy the book, or several. What high dollar book is going to multiply so many times that the investment is worth it at 1/1000? It almost seems more worthwhile just to own a share of Action 1, whatever that does for ya, then make $10 on a $50 investment in a couple years.

I know Overstreet is far from perfect, but look at the best 1 year investment books from 2019-2020:

Golden Age: Motion Picture Funnies Weekly 1 - 43%

Silver Age: Fantastic Four 5 - 25%

Bronze Age: Marvel Spotlight 5 - 60%

Copper Age: Albedo 2 - 87%

Modern Age: Tec 880 - 5900%...ignoring that one, Cap Marvel 17 2nd - 50%

So the best investments come bronze age and newer, and at much cheaper prices than Golden Age Mega Keys. 

Maybe after this, you'll be able to buy a share of the GOLDEN AGE 500 or something like that, to hedge against individual book losses and ride the tide of classic comics in general...

Speaking of, can you short shares? 

[Gatsby77]

12 hours ago, bc said:

The same guy who bought the card? 

the purchaser of the Underlying Asset is...the asset manager of the Series #86JORDAN

Double sweet deal for him 

-bc

Holy S&$*%

This screams sketchiness.

Not just "market manipulation" but potential "securities fraud."

I usually take anything Chuck Rozanski says with a barrel of salt, but this whole scenario brings to mind his old Tales from the Database essay "Fooling Bob Overstreet, and Other Fun Games.": https://www.milehighcomics.com/tales/cbg81.html

"The thing to realize here is that Bob Overstreet does not sell any comic books. He compiles sales data that he receives from comics dealers. That makes him a prime target for all sorts of efforts to raise the values of certain genres. The simplest trick is for two dealers to "sell" each other books at inflated values. Let's say that dealer #1 has an ACTION #1 that hasn't been moving, while dealer #2 has a set of Captain America #1-#10 that he hasn't turned over in a while. Each dealer writes the other dealer a check for $200,000, and they swap inventory. The checks cancel each other out, but now each can report that they "sold" those books for record prices. This happens far more frequently than you would think..."

Again, business model is simple:

Have Metro sell some dead inventory at top market value to Rally Rd.

Rally Rd. then flips the book for 20-30% more a few weeks later, while ensuring an artificially high share price by holding back 20% (or more - likely 50%+) of the shares for themselves -- and with only 500, not 1,000 shares actually on the market, you ensure a quick sell-out. And we don't know what additional shares (if any) are also held by Metro itself.

Later accept a "sales offer" (to yourself) for double book value, that profits the individual shareholders and makes headlines, but in effect allows you to purchase the full asset for yourself at just 60% of market value, while booking an "official" sale for 2x market value - thus helping increase the overall "value" (or perception of value) of the underlying asset.

 

Where does it fall apart?

Eventually you'll run out of suckers willing to pay for a CGC 5.0 Captain America # 3 at a $37,000 valuation when they realize the true value of the book is ~$28,000.

[telerites]

14 minutes ago, Gatsby77 said:

"The thing to realize here is that Bob Overstreet does not sell any comic books. He compiles sales data that he receives from comics dealers. That makes him a prime target for all sorts of efforts to raise the values of certain genres. The simplest trick is for two dealers to "sell" each other books at inflated values. Let's say that dealer #1 has an ACTION #1 that hasn't been moving, while dealer #2 has a set of Captain America #1-#10 that he hasn't turned over in a while. Each dealer writes the other dealer a check for $200,000, and they swap inventory. The checks cancel each other out, but now each can report that they "sold" those books for record prices. This happens far more frequently than you would think..."

 

Hasn't this type of scenario or similar also has been postulated with GPA manipulation?

[Gatsby77]

8 minutes ago, telerites said:

Hasn't this type of scenario or similar also has been postulated with GPA manipulation?

Exactly - it's been going on for decades.

But what happens when Rally Rd. starts reporting to GPA? What's the book worth?

Captain America # 3 in CGC 5.0 value: $28,000.

Captain America # 3 in CGC 5.0 (securitized via 1,000 shares): $37,000.

Captain America # 3 (individual slabbed pages, aka 3% shares - as available now via Lone Star or eBay): $375 - $3,250, depending on the page desired.

[blazingbob]

1 hour ago, Gatsby77 said:

Exactly - it's been going on for decades.

But what happens when Rally Rd. starts reporting to GPA? What's the book worth?

Captain America # 3 in CGC 5.0 value: $28,000.

Captain America # 3 in CGC 5.0 (securitized via 1,000 shares): $37,000.

Captain America # 3 (individual slabbed pages, aka 3% shares - as available now via Lone Star or eBay): $375 - $3,250, depending on the page desired.

Is GPA pulling sales data from SEC filings?

[Arkadin]

Here's a pretty interesting Bloomberg article (and video) from 2019 about the company. This is before they were doing comics, just classic cars - but it does answer a lot of the points people have brought up here. The fact they're still in business today and branching out into other collectibles is interesting.

As Bloomberg points out, the target investors are certainly Millennials (not grumpy 50-year-old collectors like us ).

 

[Gatsby77]

55 minutes ago, Arkadin said:

Here's a pretty interesting Bloomberg article (and video) from 2019 about the company. This is before they were doing comics, just classic cars - but it does answer a lot of the points people have brought up here. The fact they're still in business today and branching out into other collectibles is interesting.

As Bloomberg points out, the target investors are certainly Millennials (not grumpy 50-year-old collectors like us ).

 

Key paragraph:

"Liquidity is a concern. The value of the cars must rise faster than the expenses associated with owning them if the company is to make money. And since there is no third-party exchange platform, Rally Rd. could potentially be setting its own sell price—as opposed to a liquid market, where you would get the price that someone on the other side of the trade is willing to pay."