Fractional Investing in Sports Cards Has Been A Failure
Scrolling through the sports card assets on Rally, you quickly realize one of the pitfalls of fractional investing. Even with a viable platform, the liquidity isn't there, resulting in overpriced assets compared to today's market price.
Some assets are trading comparably to recent sales. Still, most are painfully trading for much more than the cards' worth. Nobody wants to sell for a loss. Rally is a survivor of the euphoria in the fractional investing space that ballooned in the wake of the COVID-19 pandemic. Both the stewards at Rally and retail investors got caught up in the mania. But give Rally some credit.
Other fractional sites like Otis and Dibbs either went bankrupt or pivoted their business model. Sports fractional site Collectable has turned into a black eye for the industry. Dozens of high-end sports collectibles from the Collectable platform are being held hostage after the company was bought out.
Vint - a fractional marketplace for fine wines - pivoted away from retail investors to a business model catering to accredited investors. Nobody could blame the companies for pivoting. Fractionalizing collectables for retail investors is expensive and time-consuming. Vint's pivot was a matter of survival.
But one lesson learned in the sports collectible fractional space is that it's fraught with risk, and for most investors it has been a total failure. There are several reasons for this, but it's centered around combining crowds with the nature of "investing" in sports cards and memorabilia. In Collectable's case, it also deals with the risk in the entire venture and the consequences of its demise.
There have been successes. A 1938 Goudey Joe DiMaggio auctioned in September returned an 88% profit from its initial offering. In April, a 1934 Goudey Lou Gehrig returned a 145% profit from its initial offering. But most of the cards are underwater.
It should serve as a lesson to collectors who want to turn into "investors;" the cards are finished products. They're unlike investing in commodities used to make products or businesses like Starbucks that sell those products. Investing in cards can be profitable. But for most, it'll prove to be a losing proposition.
I scoured the sports card assets on Rally, so you don't have to, and found one card that could provide a return. A disclaimer: this is not financial advice. It's simply an analysis of the potential deals on the site. A second disclaimer: fractional investing can be illiquid, tie up your money for years, and there's no telling what happens when a company goes belly-up (i.e. Collectable).
You will notice how much I had to strain to arrive at a scenario with a positive return.
1. 1939 Play Ball Ted Williams Rookie Card SGC 8.5 ($31,920 on Rally)
SGC-graded cards do not sell on the secondary market like PSA cards. But you can crossover into a PSA slab, and this scenario involves several "ifs." Five recent sales for the card in PSA 8 have ranged between $31,000 and $43,000. There's a saying in the hobby, "Buy the card, not the grade." The saying means you should inspect the card to determine if it's worthy of its grade. The Williams on Rally is a clean copy with very nice corners. Its major drawback? It's slightly, but noticeably off-center to the right. If it were crossed over to PSA, then an 8 is within play. It may even cross into a PSA 8.5, missing a 9 because of its centering. Of course, you're investing in the hope that a potential buyer will understand this and buy the card near the high end of recent sales at $43,000.
