Buy Jordans or buy stocks?

In today’s Exponential Investor…

  • Two days to go!
  • The most exciting thing in the 90s
  • Traditional finance sucks

Tomorrow is Christmas Eve, how exciting!

That means in just two days’ time it will be… Christmas Day!

And we all know what that means…?

PRESENTS!

Sure, sure there’s more to Christmas, being with family, giving, love, happiness, yadda, yadda, yadda. Don’t tell me you don’t get a little excited about the fact that you’ll be getting some tasty gifts.

I like it, you like it, we all like it. Let’s not pretend that Christmas isn’t really about presents. If it were about all those other things, no one would give presents. But we do, so good on us.

Now it means that you may be getting some things that you really want, and possibly some things you don’t really want. It also means that it’s one of the busiest and most profitable periods for ecommerce businesses.

All this present buying means money moves from place to place, buying things, selling things, stimulating the economy and helping to keep businesses moving in what’s been a pretty hard year.

For some businesses though 2020 has barely been a blip on their radar. In fact for some businesses, some ecommerce businesses in particular, 2020 has been a bumper year.

There’s one in particular you may or may not have heard about that is absolutely dominating. They are one of the most exciting ecommerce businesses in the world. I love them, you might even say I’m addicted to them.

But I’m also really annoyed at them. Actually I’m angry at them. They are everything that’s right with the world and everything that’s wrong with it all wrapped up with a tidy little bow on top.

Oh, I’m also not talking about Amazon either.

Jordans or LeBrons?

When I was a kid I grew up on 80s and 90s basketball. In Australia the NBL (National Basketball League) was thriving – we had some great players, even some American imports that would light up the court.

But the NBA in the US was the holy grail of basketball. It was the era of legends. Jordan, Malone, Robinson, Barkley, O’Neal, Kemp, Drexler, Wilkins – the list is longer than words I’ve got left for today’s essay.

There had never been an Australian play in the NBA until Luc Longley found his way there in 1991. Eventually he’d end up at the Chicago Bulls, with Jordan and Pippen. A team that is arguably the greatest team that’s every played the game.

By this point, the mind-90s the NBA in Australia was everything to a teenage kid. We loved the NBA before, Jordan was of course a god. But with an Aussie in there too now, it was full-blown mania.

My brother and I couldn’t get enough of it. There were NBA video games, NBA trading cards. We wanted all the merchandise, the balls, posters… and ultimately the shoes. Oh, the shoes.

It was all about having a pair of the shoes that your favourite player was wearing. And all the big stars had shoe deals. Jordan of course had a massive deal with Nike, as did “Penny” Hardaway. Shaq and Shawn Kemp with Reebok. Larry Johnson from the Hornets had a deal with Converse. Grant Hill with Fila.

There certainly wasn’t a shortage of shoes, shoe designs and price points for them all. But they were the thing to have. The 90s really kicked off the market for basketball shoes.

Today many of these originals are collector’s items. Some fetch thousands of dollars on second-hand markets. There are now limited-edition shoes, redesigned and relaunched “retro OG” versions – there are even shoe collaborations between players and artists.

The global basketball shoe industry is thriving. It’s also something that’s never left your humble editor. I’m not what you’d call an addict. I’ve got a few pairs around the house, a couple of different pairs of various Jordan editions, and a couple of pairs from the more current (and still playing) legend, LeBron James.

Jordans and LeBrons in this house. But while I may just enjoy the comfort and style, some people take their shoe collecting and trading to a whole new level.

As I say, there’s even real money to be made from getting the right pair at the right time and trading them in the market.

I genuinely mean the market too. You see what’s emerged over the years, is a real active market for shoes, and other collector items of cultural significance. It’s even created one of the most exciting and fast growing companies in the world, StockX.

A great story, but a failure of the system

Now on the face of it, StockX sounds like a fancy stock market trading platform. But it’s not. It’s primarily a ‘stock market’ for shoes and other collectors’ items. But mainly shoes.

You can track everything from previous prices paid for certain editions, to the price premium paid over the original retail price. It’s something to behold. And for serious collectors, or even part-time ones like me, it’s a wonderful place to browse.

For example, you can buy original 1985 Jordan 1 OG Bred shoes, the original model Jordan wore, for around £11,000. Or there is the 2016 release of the Nike MAG Back to the Future self-tightening shoes for £37,000. What makes StockX great is that al listings for sale are 100% guaranteed authentic.

It’s now also a hugely successful company. Last week StockX raised $275 million in a Series E round of funding. That gives the company a valuation of around $2.8 billion. It’s an astonishing story for a company that’s only about five years old.

A real success. But therein lies my problem with it. The Series E funding to private venture capital funds was exactly that, private. It also means that before this, there was a Series D, C, B and A.

For all the people that use StockX, how many do you think ever got a chance to invest in StockX? My guess is none at all. That’s because opportunities like StockX are reserved for VC funds, private, “sophisticated” investors, the already rich and financial elite.

The talk is in 2021 StockX will IPO and list on public markets. That will be the first chance for everyday investors to invest in StockX, and a chance for all the “Series” investors to dump their massive gains on the general public.

It’s a real issue with exciting, successful companies that they don’t reward those that are the real reason for their success, the people that use them. It’s something I think will change, has to change, and that smart companies will force to change.

Imagine if StockX made the decision to ring fence stock for everyone that’s made a qualifying number of purchases or sales on its platform. Rewarding those that believed in them the most. Imagine the good will that would create, the buzz that would create, the potential reward for the everyday investors.

Sadly that’s not the case. It’s an inherent problem in how global finance works. Arguably the “retail” investors locked out from opportunities like these, know the company better than anyone else. Yet the ones that really benefit are those who don’t want to give you access and stop you from accessing real growth opportunities.

StockX is a great story, but it’s also a reflection of everything that’s wrong with how traditional investment markets work too.

Regards,


Sam Volkering
Editor, Exponential Investor

Category: Commodities

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