PSA Chairman Kevin Lenane explains how ‘Passion Equity’ has opened up new fundraising investment opportunities | CSQ
The 2008 financial crisis fundamentally and irrevocably changed the global investment landscape, sowing a seed that revolutionized our approach to value design.
Before 2008, we could not perceive a more stable conception of value than that of real estate. Then Wall Street proved us wrong. The world has seen a combination of creativity and greed collapse our most tangible and credible asset market. Pandora’s box was well and truly open, and the question on everyone’s mind was, “How do we really assess stable value?”
An unlikely response has materialized in the form of hobbyists and collectors – a group that has found unwavering value in beloved icons and possesses an irresistible inclination to gamble for prestige. Add to that an investment market that craves diversification, and now trading cards are fast becoming the world’s most important tangible asset.
How Trading Cards Helped Revive the Financial Market
Trading cards are ‘passion capital’, aggressively consumed by a dedicated investor base and arguably the greatest liquidity option in any competitive market, having outperformed both gold and real estate over the course of the last months of 2021.
Kevin Lenane, new president of Professional Sports Authenticator (PSA) recently confirmed this during a conversation with CSQ CEO David Wurth. “The big value behind trading cards is that there is a tangible element to them, unlike NFTs or cryptocurrency,” says Lenane. “They are like a currency backed by gold, with the athlete providing the tangible value and the physical presence of the card reinforcing it. Cards may increase or decrease in value, but due to the passionate personal investment of collectors, they will always retain inherent value.
It’s an investment factor that the investment community has enthusiastically embraced, culminating in the $6.6 million exchange of a Honus Wagner card last year. Lenane attributes the incredible success of his industry to a combination of deep understanding of the market and the fervent creativity of industry players.
“As someone with decades of business experience, I can say with some authority that creativity is vastly underrated,” says Lenane. “He flourished in the collectibles industry, and there’s still a lot of potential for growth.”
Lenane’s passion for collecting has spearheaded the growth of the industry
Lenane tells Wurth that he has always been a collector. “I collect vintage and modern maps, and even vintage computers, which is a bit odd,” he says. “I have been a hobbyist myself since I was 5 years old. However, my professional background is in machine vision and computer vision. So when I saw the transformations in the trading card grading industry , it seemed quite natural to put my technological expertise at the service of optimizing this industry.
PSA is the world’s largest third-party collectible card grading and authentication company.
Lenane created his company, Genamint, based on the software he developed to digitally classify maps. Genamint was acquired by PSA in March 2021, and Lenane led PSA’s product division until October, when he was named its president.
The passion of industry members is just as important as that of investors
Lenane says he lives his passion and believes those who find a crossroads of interests in the industry are a warehouse for untapped creative potential and growth opportunities.
For example, Lenane describes the transformation of patch cards, which originally contained sections of player uniforms and now include autographs and gold inserts. “It increases the tangible value of the asset,” he says. Likewise, the industry has expanded to include new opportunities for vault companies. “Vaulting has really taken off as investors look for ways to increase their value while reducing shipping costs and taxes,” says Lenane. “As a result, you can now trade cards online with the guarantee of professional storage and backup by vault companies that provide dedicated card trading services.”
Other innovations have seen an increase in “split trading cards”, where multiple people or even newly created businesses own a single high-value card. These companies are divided into shares which are sold to different investors. This allows beginner players to invest a small amount of money without having their trade size governed by the price of the investment. Shares can then be traded between investors in a system comparable to the stock market. “The value of modern collectible cards rises and falls based on the performance and career trajectory of specific players, creating a market that is no different from traditional investments,” says Lenane.
It was a spark of creativity in the industry that resulted in a new form of wealth generation. “They made the connection between sporting fervor, betting and the untapped demand for sports-focused scholarship,” says Lenane. “The market uptake has been incredible.”
New growth opportunities in trading cards and other passion stocks
It didn’t take long for the industry to realize that the opportunity for value creation extended far beyond sports fans. “The gaming industry has been a supernova for investors, as traders peddle everything from Pokemon cards to Super Mario Bros. PSA is expanding in Europe and Tokyo, and the potential for growth is exciting, especially for the leaderboard the same day,” says Lenane, referring to the practice of grading authorities holding events for collectors to turn in their cards and receive immediate valuation. “It increases the tangible value of the fundraising and adds to the excitement of being an investor. PSA is looking to increase its participation in such events.
He adds that environmentalism is an important factor when an industry grows, and PSA sees itself at the forefront of what is possible for sustainability within the manifold industry. “We use the latest packaging materials and as soon as more environmentally friendly recyclable materials become available, we will be the first to market.”
Meanwhile, much of the growth is taking place in the digital sphere. Popular YouTubers have entered the industry, promoting collectibles and broadcasting live playing with tradable cards. “There is a new generation of collectors entering the market and their proclivity for the online environment introduces a host of new opportunities,” says Lenana. “With enough creativity, new and existing industry players can tap into this market in uncharted ways.”
Lenane describes the magnetism of industry as the natural result of a cross between leisure and investment. “Who wouldn’t want to make money as an extension of their current passion? This is the magic of my work. I become a collector and a technological innovator,” says Lenane. “It’s the best of both worlds. This is also the magic behind this industry – we have tapped into the life force of enthusiasts around the world and enabled them to capitalize on their passion.
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