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The expense of running a grading service
logger7
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When CLCT, the parent company of PCGS was publicly traded the profits and business expenses were public record.
Are these really profitable companies with all the costs associated with running them? How about CAC, how long before they recover all the business expenses of starting up? Are the lesser companies such as Anacs profitable?
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It's hard to stay in business as long as they have without making a profit. So I have to say they are making good profit.
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I cannot imagine how a company like ANACS could have stayed in business this long if it was not a better than break even result, same for P/N. CACG is unknown yet as we are still watching to see how the market reacts to this newcomer, but my guess is it will take a year at least to recoup the startup costs.
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logger7
Have you looked at the submission fees lately? These companies are making money hand over fist.
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Yes. You can be sure Private Equity would not have any interest in the space if it was not highly profitable.
Companies that cannot gain traction or credibility come and go. Anyone you are asking about is very profitable. Some more than others.
But you can also be sure that the one guy who had a hand in starting all of the leading services knows exactly what he is doing. He doesn't need us speculating about his break-even date. Being given an opportunity to be one of his investors in CACG is probably like having a chance to invest in Google at its IPO.
what is under $15? do you have to be an authorized dealer to get that price or bulk submissions?
Is there a breakdown showing what percentage of coins graded are new stuff from last 2 years?
$300 maximum value per coin bulk submissions are well below $15.
They have to have shipping and receiving, inventory, graders, encapsulation, quality, accounting, payroll, customer service, security…probably making after taxes 10-15%.
Grading and membership fees are a pure profit sale (no coin inventory cost) - just sales - Opex. So with good Opex cost mgt they will make money.
Can anyone who meets the minimum qty be a bulk submitter? Or do you have to be authorized?
Depends on a lot of factors. NGC gives any authorized dealers bulk, and I think the elite membership also includes it, or used to at least.
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Usually, with private equity acquired companies, there is a 3-5 year horizon to then take public and reap the rewards from stock sales.
NGC and PCGS were not troubled companies when bought so the idea is to wring out expenses and try and broaden their markets to increase the company’s valuation.
Time will tell if the MBAs can realize their vision.
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Meanwhile submitters endure long waits and turn-around times; I guess their reasoning is that they have no where else to go with the same level of prestige in their holders. I hope cac does not sell their platform.
Grading services are definitely profitable - which is why NGC was purchased by Blackstone. CU was purchased by a group of investors - and while they are collectors (which I love), I'm sure they are doing it to make money.
But also look at the countless benefits we get because of grading services. For me, I can buy a coin thousands of miles away for my Australian collection and have confidence in the condition. I passed on one special Australian coin recently that looked amazing, but was not graded.
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