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Contributors: Douglas McIntyre Jon C. Ogg

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Friday, August 25, 2006

What Is Topps Worth?

Would you like some baseball cards with your investment?

The Topps Company, Inc. (TOPP) early Friday announced that at the Company's Reconvened 2006 Annual Meeting of Stockholders, stockholders elected the Company's four nominees -- Arthur Shorin, Timothy Brog, Arnaud Ajdler and John Jones -- to the Topps Board of Directors. This makes 10 on the board now instead of just 9, but what is interesting is that this is now at least partially more of an activist board of directors with members from Pembridge Capital and Crescendo partners instead of a board that just wants to open packs of baseball cards and chew some really bad gum.

This could portend a sale of either the whole company, or at least a sale of one of the units. They sell sports collectibles and trading cards, and they have several candy units. If you will recall Topps was unable to find a buyer for its confectionary unit in the past. If you tried the gum in the past you would know why. The gum should go the way of $1.99 6-packs of beer.

At $8.69 it is in the middle of the $6.87 to $10.39 52-week trading range, and still under the trading range for almost all of the year before that. It has lost nearly 1/3 of its value in the last 5-years, and has not been able to stay over $10.00 for most of that time. In the early 1990's this company was over $15.00 for much of the time.

Will this make my 1955 Topps Baseball set more valuable? The big issue with the modern sports collectibles arena as a business now is that most of these things are very "massively" mass produced and the sets from the late 1980's to present day that are worth no more than when they were made. Steroids scandals and the rowdy behaviour and antics of players hasn't helped, and whenever there is a sports strike the company suffers.

Topps is not a member of our BAIT SHOP, and it is questionable as to if it will make it ever. It is obvious what the problems in the industry are, but a fix to the problems does not just jump out as an obvious answer. It has very spotty earnings that are hard to adequately smooth out each period, and finding the growth prospects for the company has been more than elusive. Even if the company is able to meet or slightly exceed the scace forward estimates, it cannot be called a cheap company. It is very possible that someone else may want the company, but things may have to get worse before another group or company would step in to say "Mine!" in the land grab.

Jon C. Ogg
August 25, 2006

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