Feedback on this idea

[JIM F.]

I've been thinking about the viability of selling securities under an existing Corporate entity to private investors and use the proceeds to selectively purchase coins that are priced right (via auction, Ebay, or private party) with the objective of selling them within 12 months with a target of 20% per gain per transaction. Probably not play precious metals market (or with very low exposure), but look for below market value opportunities in the rare coin market.

 

If I were to do this, I would have on staff active, experienced, and trusted individuals who are active at coin shows. I am CEO of a CA C-corp that I could operate under and immediately issue securities if something like this were to be viable so it would all be above board with the securities SEC registered.

 

 

Comments?

 

 

[MarkFeld]

I think it is wholly unrealistic to think you can make anywhere close to 20% (or even half that) in a 12 month period.

 

Commissions and/or the buy-sell spreads can easily eat up a large % of that amount. And that aside, you have no assurance that prices will increase, rather than decrease, during your holding period.

 

If only it were that easy!

[JIM F.]

Mark,

Fair enough.....an exchange of ideas is a good thing. What do you think about this modification...assuming and correct me if I am wrong that there are opportunities in acquiring high-dollar items (>$100k or perhaps >$250k) at "discounted" prices due to a distressed seller that can't wait to sell at auction to collect auction proceeds -- assuming it sells at all?

 

IF this were true, a fund specifically looking for such items may be a "go-to" source for someone looking for a cash buyer. Or is this an already crowded market?

 

Thanks for all feedback.

 

 

 

[cpm9ball]

Mark,

 

Wasn't there some scheme similar to this about 20 years ago where the guy disappeared with a lot of rare coins and left the sellers with a bunch of bad checks?

 

Chris

[JIM F.]

I'm not proposing a "scheme". Any unfair inference is not appreciated.

 

Thank You.

 

[MarkFeld]

Mark,

Fair enough.....an exchange of ideas is a good thing. What do you think about this modification...assuming and correct me if I am wrong that there are opportunities in acquiring high-dollar items (>$100k or perhaps >$250k) at "discounted" prices due to a distressed seller that can't wait to sell at auction to collect auction proceeds -- assuming it sells at all?

 

IF this were true, a fund specifically looking for such items may be a "go-to" source for someone looking for a cash buyer. Or is this an already crowded market?

 

Thanks for all feedback.

 

 

I think that, far more times than not, there are plenty of large buyers who are willing and able to step up with the funds. The key would be getting your name out there to potential sellers and convincing them that you are a highly competitive buyer.

[MarkFeld]

Mark,

 

Wasn't there some scheme similar to this about 20 years ago where the guy disappeared with a lot of rare coins and left the sellers with a bunch of bad checks?

 

Chris

Chris, sorry, I'm not sure of whom you're speaking.

[cpm9ball]

I'm not proposing a "scheme". Any unfair inference is not appreciated.

 

Thank You.

 

Sorry! I wasn't implying that you would do the same. I should have worded it better.

 

Chris

[jom]

Mark,

 

Wasn't there some scheme similar to this about 20 years ago where the guy disappeared with a lot of rare coins and left the sellers with a bunch of bad checks?

 

Chris

 

I don't know about that but there were ventures out there that did similar to what the OP is asking. They were created in the market after the TPGs were created, 1989/90 or so. They were ultimately FAILURES probably for the reasons Mark brought up...and I'm certain people lost money...big time. I think they were in the form of Mutual Funds...I could be wrong though.

 

jom

[physics-fan3.14]

You want to know the best way to make a fortune in rare coins? Start with a larger fortune.

 

Making money in the coin market requires skill, dedication, patience, and luck.

 

Speaking specifically of your idea - I don't know anyone with a lick of sense who would buy securities to finance this plan. You have no track record in the coin market, and it would take a real sucker to give his money to you with the hopes that it might work. Too many bad examples in history. I'm not saying you couldn't do it, its just unlikely.

[mintcollector]

While I understand this may be a little different; I would still advise you to research what happened to the now infamous 'Athena' fund; back in the 1980's...

 

Of course, that was a direct mutual fund and not the same as what you are proposing, it is still a nusmatic financial instrument and one that brings back bad memories...

 

PS: Pardon my spelling, as I am still getting used to this IPad keyboard...

[Buffalo Head]

You want to know the best way to make a fortune in rare coins? Start with a larger fortune.

 

Making money in the coin market requires skill, dedication, patience, and luck.

 

Speaking specifically of your idea - I don't know anyone with a lick of sense who would buy securities to finance this plan. You have no track record in the coin market, and it would take a real sucker to give his money to you with the hopes that it might work. Too many bad examples in history. I'm not saying you couldn't do it, its just unlikely.

 

I agree, to many failures in the past to even give it a go....I remember a couple that really went bad. Sooooo, good luck.

[Kamillion]

You want to know the best way to make a fortune in rare coins? Start with a larger fortune.

 

Making money in the coin market requires skill, dedication, patience, and luck.

 

Speaking specifically of your idea - I don't know anyone with a lick of sense who would buy securities to finance this plan. You have no track record in the coin market, and it would take a real sucker to give his money to you with the hopes that it might work. Too many bad examples in history. I'm not saying you couldn't do it, its just unlikely.

 

+1

[RWB]

The idea is workable --- but there's a typo in the original post:

 

...with the objective of selling them within 12 months with a target of 20% per gain per transaction.

 

I think what you meant was "...target of 20% loss per transaction."

[ModCrewman-migration]

What do you think about this modification...assuming and correct me if I am wrong that there are opportunities in acquiring high-dollar items (>$100k or perhaps >$250k) at "discounted" prices due to a distressed seller that can't wait to sell at auction to collect auction proceeds -- assuming it sells at all?

I can't imagine there are many coins >$100,000 in value that an owner is so distressed that he'd need to liquidate before the coins could be brought to auction. I would envision the owners of such coins as using "fun money" to acquire such items, which would leave a whole lot of assets in line for liquidation before the coins were brought to a "fire sale".

[e1cnr]

if you can find buyers that are willing to sell stuff for half of what it is worth, you have a chance (depending on your overhead)

 

assuming you know what it is worth and how to get that worth when you sell

 

there are full page ads in many newspapers inviting people to bring in their collectibles for appraisel/purchase.

 

What would be the advantage of doing what you are suggesting with a CA coporate entitiy?

[SWNGC]

There are much bigger issues at hand before he even gets to the viability of his "value proposition"

 

First - There's the SEC and compliance - I'll assume he's not already registered (it can easily take 250k outlay to get compliant and registered for an IPO (assuming publicly traded) and he would already be well beyond his current investigative phase). That said, he would probably be looking for an exemption or limited filing requirement;

See http://sec.gov/info/smallbus/qasbsec.htm#eod6

 

Obviously he would want to have involvement from beyond CA and/or wish to publicly disclose his opportunity, so he would probably need to target exclusively "accredited investors";

See http://www.sec.gov/answers/accred.htm

which would limit his investment pool and involve people who, if interested to start with (i.e. that group that exists at the confluence of "accredited investors" and "those harboring numismatic interests"), would probably be the same guys currently buying/selling any "distressed offering" anyway.

 

The added bummer is that if you fail, at least a few of these guys will also have the legal resources on hand to critique some action taken as non-compliant and/or criminal and look to recover any corp and/or personal assets from the founder...

 

Way too much risk mitigation required to be worth the limited returns, regardless of the viability/feasibility of concept (which in itself requires much more risk mitigation as already pointed out above by others)... IMHO

[ultra-crepidarian]

It has been done and it ended badly. Merrill Lynch offered the first numismatic investment limited partnership, the Athena Fund in 1986. In 1988 it offered Athena Fund II. The birth of Athena caused Zeus a major headache and the death of the Athena Funds caused major headaches for Merrill Lynch and thousands of investors. In 1994 Merrill Lynch settled with its investors at a cost of between 20 and 30 million dollars.

 

At first blush, I basically don't like the idea. The way collectibles are tax is problematic - no income (except through the sale of assets) no depletion or depreciation. Transaction costs are high: You buy $10,000 of stock and you pay $7.50, you buy a $10,000 coin and you pay $1,500. You really would have to develop a detailed business plan to access the possibility of success. I'm not saying it couldn't be done but it doesn't strike me as particularly easy to pull off.