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business model

3 posts in this topic

Can someone explain how this works to me?

I see a lot of graded coins on eBay for very inexpensive prices.  Here is an example: 1971-S 1C RD Lincoln Memorial Cent-PCGS MS62RD--372-1 https://ebay.us/GcSSK2 for $9 and FREE shipping.  The seller has a lot of these low end graded US coins for sale for very inexpensive prices.  It normally costs me > $50 to get a coin graded. Who paid to get these low value items graded? What did they pay to get it graded? If the eBay seller purchased this asset already graded, how much do you suspect they paid given they also have to pay ~$3.5+ for postage and still make a little profit?  Given how many of these are listed on eBay it appears that either a lot of people are getting stuck with the grading costs or they are getting coins graded for pennies on the dollar (weak pun intended)--both don't make sense to me--so i must be missing something here. 

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The business approach is much like those who order hundreds of Silver Eagles, pick out the best and send them for "grading." The highest "grades" are sold for outlandish premiums and the rest sold a little above melt. Knowledgeable pre-screening ensures that slabbing fees are allocated only to coins that are good candidates for the highest grades, and thus the best profits. The rest are just a temporary hold on cash before being sold and reinvested in more Silver Eagles.

This is also done with rolls of uncirculated common silver and bronze coins. Coins that did not "make the grade" are sold off cheaply to retail dealers, and those are the ones seen in discount slab boxes and in ebay ads like the one the OP mentioned.

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