The Sports Card Industry Is Having A Tech Revolution - PSA Forbes Article

[BobC]

Originally Posted by Lorewalker

A few things that stand out to me in that article are:

"...pushing its valuation to $4.3 billion. That represents a five-fold increase from the roughly $850 million acquisition price last February..."

Wondering where they base that valuation? Is that valuation based off of the 300 million in gross revenue? CU at the time of acquisition estimated 35 million for Q2 revenue and had over 30 million in Q1. Annualized it would be reasonable to project 150 mil in gross revenue. So did the board screw shareholders and approve a sale well below the value of the company? They had 13 million cards to be graded at the time of purchase. That is a huge Receivable.

The group may have paid 853 mil for the co but they also spent money after the acquisition buying other companies and expanding operations so the 5 fold-increase while an accurate statement does not paint the whole picture. Additionally there are operating costs that have increased substantially. I just wonder if they are as profitable at this time as they were prior to being taken private.

"...PSA now has more than 100 graders, up from 44 at the time of the acquisition and the 14 the division had for many years."

In order to get those 13 million cards graded it had to be done but how do you find 56 more qualified people to grade cards? How do you remain consistent with an operation that large? Not sure that you can. Card grading might not be neurosurgery but in just over a year they located 56 qualified graders?


"A 2019 scandal exposed corrupt collectors selling altered cards through the marketplace PWCC, many of which carried grades from PSA."

2019 scandal exposed corrupt collectors selling altered cards? Maybe it is semantics but the bulk of the dudes selling altered cards through PWCC, through their own ebay accounts, etc are not collectors but dealers. Dealers who PSA promoted or promotes and at the very least allowed to submit the bad material.

Chase,

Regarding your first point on valuation, most companies are usually valued at some agreed upon multiple of EBITDA, and EBITDA is generally based on GAAP. They had just purchased Collectors Universe only a little over a year ago, and obviously established a price, most likely using CU's EBITDA just prior to the sale, with maybe some possible adjustments for projections. In making that statement as to the current value, they probably took their most recent actual (or maybe even projected) EBITDA from the company's operations and multiplied that by the same multiple used for their actual purchase of the company. Based on that, they are likely talking about multiple times increases in net Earnings Before Income Taxes, Depreciation, and Amortization. Would make sense with the surge in submissions, accompanied by the huge price increases, they have experienced during the pandemic.

Also, don't forget the recent Genamint acquisition as well. Don't know if they added that into this valuation as part of the overall company, or if they are keeping that separate.

To put it simply though, they are likely making a boatload of even more money right now than they were when it was still a public company.