OT today's society, Whatnot vs Sotheby's

[Aquarian Sports Cards]

Whatnot recently did a round, raising capital at a valuation of $11.5 Billion on a projected $6 billion in sales in 2025.

Sotheby's sold in 2019 for $3.7 Billion on $6 billion in sales.

it's just like the emperor's new clothes to me though. Are they profitable? If yes, than why are they bothering to sell more of the company to raise money? If no, then why are they "worth" so much?

We've become a world of speculators and the boom bust cycle is just speeding up all the time and hopping around from dotcom to real estate, to collectibles to AI and round and round we go.

Nobody wants to build something of actual value they just want to get in on something of perceived potential value and make their killing flipping their piece.

If you wanted to make actual profit Sotheby's is a much better buy than Whatnot. If you want to see if you can find the next bigger sucker, Whatnot all the way.

I compare the all of these boom markets to Florida Condos in their boom/bust cycle. Eventually you have to find someone who wants to live there. You can shuffle the property from investor to investor marking it up every time, but unless you find someone who wants to live there at your price, you're just hoping for one more sucker bigger than you.

I'll go back to shaking my fist at clouds now...

[balltrash]

Not speaking to WhatNot's value and/or if they actually make any money but, and this is hard to fathom, Sotheby's LOST $106 million in 2023 and upped that to $248 million for 2024. Will be interesting to see how much they can loose on $6 billion in sales this year...

Originally Posted by Aquarian Sports Cards

Whatnot recently did a round, raising capital at a valuation of $11.5 Billion on a projected $6 billion in sales in 2025.

Sotheby's sold in 2019 for $3.7 Billion on $6 billion in sales.

it's just like the emperor's new clothes to me though. Are they profitable? If yes, than why are they bothering to sell more of the company to raise money? If no, then why are they "worth" so much?

We've become a world of speculators and the boom bust cycle is just speeding up all the time and hopping around from dotcom to real estate, to collectibles to AI and round and round we go.

Nobody wants to build something of actual value they just want to get in on something of perceived potential value and make their killing flipping their piece.

If you wanted to make actual profit Sotheby's is a much better buy than Whatnot. If you want to see if you can find the next bigger sucker, Whatnot all the way.

I compare the all of these boom markets to Florida Condos in their boom/bust cycle. Eventually you have to find someone who wants to live there. You can shuffle the property from investor to investor marking it up every time, but unless you find someone who wants to live there at your price, you're just hoping for one more sucker bigger than you.

I'll go back to shaking my fist at clouds now...

[Rhotchkiss]

There is a lot to unpack here. Comparing the Whatnot valuation to Sotheby's: First, I think Whatnot is considered a tech company, whereas Sotheby's is more old-guard/traditional, with tech companies getting higher multiple-valuations than traditional companies. Second, Whatnot is a very young company compared to Sotheby's yet it had the same amount of sales in 2025 than Sotheby's had when it sold, meaning that Whatnot is growing and growing much faster than Sotheby's. Third, I expect the pool of buyers is much deeper for a tech company than a human-capital-intensive auction house, selling high end items online and in person from major cities around the world. Fourth, and related to the other points -- I expect it costs Whatnot much less to make a $1 than what Sotheby's must spend to make a $1, and I bet Whatnot is much easier to grow and scale than Sotheby's at this point -- Whatnots best days may be ahead of it whereas Sotheby's likely peaked. Finally, I bet Whatnot fits multiple capital buckets of private equity -- tech, retail sales, emerging, etc., each if which buckets have different return targets. I expect Sotheby's is less dynamic and more "core" on a returns profile, but likely with more downside, so capital is likely investing in lower returns with higher risk. As such, capital cannot overpay on the acquisition and grow its way of a bad deal. Add that to the fact that the pool of subsequent buyers is shallow, and the buyer of Sotheby's needs to be more prudent and frugal.

Then you ask "Are they profitable? If yes, than why are they bothering to sell more of the company to raise money? If no, then why are they "worth" so much?". One reason they sell part of the Company, regardless of whether they are profitable, is to monetize equity for the founders and employees who have been compensated in equity. We start companies to make money - make money from operations and, ultimately, from the sale of part or all of the company. They sold to make money. God bless'em.

Are they profitable? Who knows, although my gut is yes. Regardless, the pathway to growth seems relatively clear and the track record of rapid growth seems established -- they grossed $6b in 2025 like Sotheby' likely in its 50th++ year grossed $6b in 2019 - and eventually they can grow themselves into profitability.

Bottom line, Whatnot is hot, Sotheby's is not. Good for the Whatnot people.

[Aquarian Sports Cards]

While you address the specific example of Sotheby's vs Whatnot. You don't really address the overall societal observation. We have become a nation where perceived potential has become more important than any actual value.

The American dream was once to build something and hopefully pass it on to your kids as your legacy. Now it seems the goal in life is to build something simply to get it to a point to sell it, and if you're very good at that, lather rinse and repeat. As indicated above, I know the line of thought is old-fashioned, but it makes me sad that the idea of creating, nurturing and growing something is less important than grabbing cash at the earliest opportunity.

Shows like Shark Tank simply reinforce the idea. Doesn't anyone want to actually live in the condo anymore?

Of course this is an easy attitude for me to take, nobody's offering me life changing money for my company, but I love what I'm doing, I love the whole process of building something from nothing. I can't imagine anyone would offer me enough to walk away from that (and rightfully so, my company isn't WORTH what it would take to get me to walk away).

My problem when I start a discussion like this is focus. I want to talk about the macro and then give a million somewhat different examples which then lead me off on tangents. But overall, my point is that all modern markets seem analogous to me. They are largely based on speculation and the biggest sucker principle. Whether it's Pets.com, a condo in Florida, Logoman Kobe/Jordan, or any other market you can think of I just see a giant game of musical chairs and wonder what happens when the music stops.

[Exhibitman]

Sotheby's and Whatnot are completely different businesses except for the fact that they both sell second-hand goods. Regardless:

Cost of scaling up is the key.

Sotheby's takes possession of the items it sells. That means legacy real estate, employees, insurance, etc. It also has to fulfill its orders. For Sotheby's to expand using its business model requires more capital investment, both physical and human capital.

Whatnot never touches a tangible item. Its marginal cost to add another item to the offerings is essentially nothing.

As a result of the different models, each company has different clientele. Sotheby's has to take a relatively large cut of the gross to keep the lights on and the champagne chilled. It can only handle items that are sufficiently significant to be cost effective. Many potential consignors are unable to meet the necessary valuations so they are shut out, which also necessarily shuts out a large pool of bidders who simply cannot afford to bid on anything they sell. Whatnot takes a far smaller cut of the gross and it allows essentially anyone to be a seller or a buyer.

Now, I'd observe that Whatnot is rife with shill bidding, but Sotheby's has been nailed for tax fraud and price fixing. Neither is squeaky clean.

And to Scott's later point, value is merely perception. The stock 'market' is just the intersection of two conflicting bets on a company. It is delusional to think that there is intrinsic usable value to anything except that which one can hold and consume or wield to force others to turn over their consumables. The current mindset is merely the democratization of the driving force of all investment: money. Pile up the money because it buys security, safety, health and freedom in our Ferengi-lite society. The kids today are perhaps more nakedly crass about it, but they are no different than we are. "I create nothing. I own." Gordon Gekko. That was 38 years ago.

[sbfinley]

Originally Posted by balltrash

Not speaking to WhatNot's value and/or if they actually make any money but, and this is hard to fathom, Sotheby's LOST $106 million in 2023 and upped that to $248 million for 2024. Will be interesting to see how much they can loose on $6 billion in sales this year...

I'm not an economist so pardon what might be obvious, but how does a company that has zero cost of goods lose a quarter billion in a year?

[Aquarian Sports Cards]

Originally Posted by sbfinley

I'm not an economist so pardon what might be obvious, but how does a company that has zero cost of goods lose a quarter billion in a year?

Same way my company on a little over a million in sales a few years ago was still losing money.

A company that has cost of goods also usually has MUCH higher gross margins.

[Rhotchkiss]

Scott, regarding this statement: "We have become a nation where perceived potential has become more important than any actual value."

I think that has been the case for a long time, likely because its human nature. Consider the NFL team who trades away a productive, veteran player for a 3rd year draft pick in next year's draft. Or the pharma company listed on Nasdaq at $80/share and has earning of -$1.30/share, but that pill in that trial sure looks promising. Or, farmers who went west looking for land, as if there wasn't enough in the existing 13 states/colonies. Then, there is my uncle who (I think in the late 1990's) paid a small fortune for the first plasma TV when the traditional TV on his mantle worked just fine and showed all the same channels, at a fraction of the price. Humans are always seeking whats next -- potential is sexy, its unlimited, its the future. The current is just plain boring.

Now, as far as companies go: I think many people start and build companies for the sake of creating actual value, earning a great living, and having a gratifying career/work-life situation. I did exactly that. But, those stories don't make headlines; although they sure as hell can attract private equity if there is enough meat still on the bone for the next guy to double his money.

I also think we need to distinguish the owner/operator from the investor. While they both are "at risk" (money, time, social capital, etc.), the latter has no true tie to the company, sees it only as a means to a profit-end, and they are not "long" in the company/business. Different strokes for two very different types of folks. The build, sell, rinse and repeat model is alive and well (and nothing new), but so too is the build for long-term value model alive and healthy, it just doesn't get the headlines.

Like may Grandfather used to say: "All you can do is live and be well, and leave the rest to God". Grow your business Scott, have fun, earn a good living, and one day (I hope) sell it for a ton.

[Brent G.]

Originally Posted by Aquarian Sports Cards

We have become a nation where perceived potential has become more important than any actual value.

Scott, you also just described the modern card hobby. How many hundreds of millions or billions have been lost on QBs like Mac Jones, Trey Lance, Zach Wilson, Justin Fields, Kenny Pickett, Anthony Richardson, or the many Jasson Dominguezes of the baseball world? Why do millions of people throw their money away on breaks that are basically legalized robbery? It's a casino culture that leaves a lot of wreckage.

[bk400]

Originally Posted by Aquarian Sports Cards

Whatnot recently did a round, raising capital at a valuation of $11.5 Billion on a projected $6 billion in sales in 2025.

Sotheby's sold in 2019 for $3.7 Billion on $6 billion in sales.

it's just like the emperor's new clothes to me though. Are they profitable? If yes, than why are they bothering to sell more of the company to raise money? If no, then why are they "worth" so much?

We've become a world of speculators and the boom bust cycle is just speeding up all the time and hopping around from dotcom to real estate, to collectibles to AI and round and round we go.

Nobody wants to build something of actual value they just want to get in on something of perceived potential value and make their killing flipping their piece.

If you wanted to make actual profit Sotheby's is a much better buy than Whatnot. If you want to see if you can find the next bigger sucker, Whatnot all the way.

I compare the all of these boom markets to Florida Condos in their boom/bust cycle. Eventually you have to find someone who wants to live there. You can shuffle the property from investor to investor marking it up every time, but unless you find someone who wants to live there at your price, you're just hoping for one more sucker bigger than you.

I'll go back to shaking my fist at clouds now...

+1.

[BioCRN]

Projecting valuation is a volatile necessity.

Sometimes the market gets it right. Amazon IPO'd at $18-ish a share in 1997 and continued to spike in price (including three 2:1 or 3:1 stock splits) for the next 5 years before turning their first yearly profit in the 6th year.

Sometimes the market gets it wrong. Fill in one of many yearly examples yourself...

Sometimes the market is weird with valuation because the people pumping money into it don't fully understand what they're investing in...like the "Linux rush" of companies in 1999-2000 where being even remotely associated with "Linux" made you the hottest new thing to pour a ton of loot into.

I have no idea what investors see in WhatNot. Maybe they hold some important patents. Maybe they've developed cutting edge streaming or back end software that others don't have. Maybe it's misplaced investor confidence. 🎵Maybe it's Maybelline🎵

[raulus]

I think your mistake may be in trying to understand it. Some things defy understanding, in large part because they are as much about emotion as they are based on steely-eyed calculus.

But I agree with the general sentiments that sexy companies sell for more than staid ones. And that there are a large number of entrepreneurs who are more focused on getting the party started and then quickly moving on, leaving someone else to figure out how to make it work.

[Steve D]

Please pardon my ignorance, but what is "whatnot"?

I've never heard of it.

Steve

[Aquarian Sports Cards]

Originally Posted by Brent G.

Scott, you also just described the modern card hobby. How many hundreds of millions or billions have been lost on QBs like Mac Jones, Trey Lance, Zach Wilson, Justin Fields, Kenny Pickett, Anthony Richardson, or the many Jasson Dominguezes of the baseball world? Why do millions of people throw their money away on breaks that are basically legalized robbery? It's a casino culture that leaves a lot of wreckage.

100% agree, it was kind of a corollary to my overall point!

[Eric72]

Originally Posted by Brent G.

Scott, you also just described the modern card hobby. How many hundreds of millions or billions have been lost on QBs like Mac Jones, Trey Lance, Zach Wilson, Justin Fields, Kenny Pickett, Anthony Richardson, or the many Jasson Dominguezes of the baseball world? Why do millions of people throw their money away on breaks that are basically legalized robbery? It's a casino culture that leaves a lot of wreckage.

None. It's a zero-sum game. An equal amount of millions or billions have been made by people lucky enough to not to get stuck with the "hot potato."

I totally get your point, though.

I think people throw money at breaks because there's a wide-reaching epidemic of gambling addiction in the U.S. these days. Possibly other countries, too.

[bk400]

Originally Posted by Steve D

Please pardon my ignorance, but what is "whatnot"?

I've never heard of it.

Steve

It's like eBay, but dodgier. And targeted at people who like to buy video game accounts.

[BioCRN]

Originally Posted by Eric72

I think people throw money at breaks because there's a wide-reaching epidemic of gambling addiction in the U.S. these days. Possibly other countries, too.

While I agree that a huge majority of people out there using breaks as a type of gambling/entertainment rush, some people are out there doing it for legit collector reasons.

I've met a few people who do team breaks because they're team collectors and buying into a break can take care of getting them most of the way to filling their collection with 1 or 2 breaks.

Everything is so expensive these days that putting together a set from packs/boxes is already too high of a gamble to buy into if you don't care about most of the cards in those packs.

[Eric72]

Originally Posted by BioCRN

While I agree that a huge majority of people out there using breaks as a type of gambling/entertainment rush, some people are out there doing it for legit collector reasons.

I've met a few people who do team breaks because they're team collectors and buying into a break can take care of getting them most of the way to filling their collection with 1 or 2 breaks.

Everything is so expensive these days that putting together a set from packs/boxes is already too high of a gamble to buy into if you don't care about most of the cards in those packs.

Fair point, to be sure.

[steve B]

speculation and following potential are nothing new. In cards it goes back at least into the late 70's.

[Aquarian Sports Cards]

Originally Posted by steve B

speculation and following potential are nothing new. In cards it goes back at least into the late 70's.

But I would say the percentages of people speculating vs collecting have skewed wildly in favor of the former.

There's a lot more wannabe George Soroses today than Warren Buffetts. The idea that there's a get-rich-quick option is too tempting I guess. Of course like most schemes, the overwhelming majority fail.

A somewhat analogous example in the card world would be Ash Jain vs any one of the fly-by night social media guys. Ash has worked his ass off. Has amassed a reputation and inventory that plays second fiddle to very few dealers I can think of, and he's not going anywhere (as he demonstrably proved by weathering the storm of the massive theft at the Dallas show)

Now compare that to some "bro" who has a couple thousand to throw at cards and thinks that, along with minimal effort or knowledge and a youtube channel, is going to turn him into a millionaire next week.

[Eric72]

Originally Posted by Aquarian Sports Cards

But I would say the percentages of people speculating vs collecting have skewed wildly in favor of the former.

There's a lot more wannabe George Soroses today than Warren Buffetts. The idea that there's a get-rich-quick option is too tempting I guess. Of course like most schemes, the overwhelming majority fail.

A somewhat analogous example in the card world would be Ash Jain vs any one of the fly-by night social media guys. Ash has worked his ass off. Has amassed a reputation and inventory that plays second fiddle to very few dealers I can think of, and he's not going anywhere (as he demonstrably proved by weathering the storm of the massive theft at the Dallas show)

Now compare that to some "bro" who has a couple thousand to throw at cards and thinks that, along with minimal effort or knowledge and a youtube channel, is going to turn him into a millionaire next week.

Pffft. Next week? Bro. BRO!!! Who has that kind of time?!?!?!?