PSA Likely to be Sold...Then Out of Business?

[Archive]

Posted By: Jamie

I am not running out to buy the stock, and certainly Collector's Universe's negative cash flow is concerning.

However, the burn rate from normal operations I believe is far lower than what is stated. I don't have an actual number, but I am guessing they are really burning about two million a year once you subtract the amount that the jewelry operation cost (and mind you, as the jewelry operation grows, it may even become profitable). But it seems to me like, if they are conservative, they could have as much as ten years of cash left.

It is important to remember that as a company, CLCT is not static, and can take measures to reduce costs and eliminate workforce as a response to a lower amount of submissions. And a lower amount is likely, seeing that card prices continue to drop.

If CLCT ever did decide to sell PSA to a private equity firm, I believe that it would be in the firm's, as well as PSA's, best interests to keep the integrity of the grading process intact. I really do not envision a scenario where PSA lowers the quality of its grades. It would trivialize all existing cards, and PSA would completely self-sabotage their own business.

So I think PSA will be in business for a long time to come, and this is not a good time to panic. As far as forgeries, it is true that they are becoming better all the time, and I don't know what to say about that. But that would affect all grading companies equally.