The private owners of the Topps company might be looking to cash out now. Depending on who the buyer is, those involved in the baseball card industry might see significant change.
People holding onto rare, valuable baseball cards are always faced with the question of when to sell. There’s always the risk of cashing in too early and perhaps missing out on a more lucrative payday in the future. That’s a dilemma similar to what the manufacturer of many of those baseball cards, Topps, is reportedly facing.
According to Kiel Porter of Bloomberg, the private owners of the candy and memorabilia company are open to being bought out. That’s all about the recent boom in valuation as Topps’ baseball card products have surged in sales, largely thanks to innovations in direct-to-consumer products like Topps Living Set. The recent fan hysteria over young MLB talents like Aaron Judge and Shohei Ohtani have contributed as well. Porter estimates the value of the company at about $400 million currently, which includes its manufacturing of candy products like Ring Pop.
Porter reports that the most likely scenario right now is for the candy and card divisions to be split and sold as individual businesses. The candy division would likely sell first and for a higher price, as it currently is responsible for anywhere from 70 to 80 percent of Topps’ revenue. That would leave the card division, which produces products for fans of MLB, UFC, MLS, WWE, Star Wars and the EPL to be bought as an entity to itself.
Like those vintage cards, the card division will only really be worth what someone is willing to pay for it. There are a couple of rumored interested parties. Gary Vaynerchuk, the CEO of communications parent company VaynerX, has recently alluded to buying Topps in a YouTube video. There’s another company whose possible purchase of the card division could spur more intriguing possibilities.
Fanatics, which handles memorabilia and merchandise for hundreds of individual college athletic departments, individual professional sports franchises and major professional sports leagues, is reportedly a player in the game as well. While that interest has neither been confirmed nor denied by Fanatics, it’s a possibility that could take the card division even more quickly in the direction it’s currently headed.
Fanatics has one key component which bears a lot of relevance for the baseball card industry. It has an exclusive license to sell sealed boxes/cases/packs of trading cards on Amazon. All Topps cards sold in such forms on Amazon already go through Fanatics’ system, making Fanatics the “middle-man” in such transactions currently. The purchase of Topps’ card division would be a massive expansion of that role with similarly significant potential ramifications.
By controlling the design and manufacturing of Topps cards in addition to sales on the world’s largest online retailer, which many end consumers are already using to acquire their desired products, Fanatics would wield a lot of sway over the industry. Fanatics would be able to produce “Amazon exclusives” like Topps currently does for Target and Walmart, driving even more hobbyists to the platform. In addition, companies who distribute Topps card products to retailers would probably feel pressure to manipulate pricing to reflect Fanatics’ Amazon rates. The familiarity and robust delivery network of Amazon could also make it even more difficult for the few brick and mortar hobby stores still in existence to compete.
Fanatics has built its business by being stellar at delivering customized products with e-commerce. Topps’ surge in value has been because of a similar business strategy. Fanatics’ relationship with MLB and other professional sport entertainment entities is already robust, but acquiring another license through the purchase of Topps’ card division would only cement those relationships further. The only question is whether that’s worth the potential expense.
If Topps’ card division is responsible for 30 percent (on the generous side, it could be much less) of $40 million in revenue, that’s $12 million. Depending on what kind of a multiplier a potential buyer would want to place on that, probably anywhere from three to 10x revenue, a buyer is looking at a max valuation of $120 million. Is strengthening the relationship with the leagues and the influence over the card industry worth that? Fanatics, or any other buyer, will have to decide that for themselves.
All of this could end up just being pure speculation, but like for a person holding on to a pristine Mickey Mantle card from the 1950s, the time to sell for Topps’ current stakeholders could be now. If a sale does happen, what that will mean for the industry largely depends on who the buyer is.