Part II
The problem is that at least some of the stamps in the program, such as the sets shown to Peña, appear to be worth far less than what Afinsa charges for them. So if Afinsa ever ran into financial difficulty and couldn't honor its guarantees, investors might well be unable to recoup their outlays on the open market. And since Afinsa isn't classified as a financial institution, it receives scant governmental oversight.
Critics of the program, including many dealers in the U.S. and Europe, say that if investors ever do suffer losses, it could unsettle the $3 billion global stamp market. And though Afinsa is privately held, any disruption in its business could well hurt the Nasdaq-listed shares of its majority-owned Greg Manning Auctions, based in New Jersey. Afinsa accounts for nearly half of that firm's sales and more than 70% of its operating profits. (Barron's wrote skeptically about Manning last year in "Return to Sender," Sept. 27, 2004.)
Extensive reporting, including interviews with dozens of dealers, auctioneers and other experts, suggests that Afinsa is selling at least a portion of its stamps at prices significantly above market levels. Though the firm's pricing policies haven't been challenged in courts, they could nonetheless be misleading to investors.
The Bottom Line: Any problems at Afinsa could disrupt the $3 billion global stamps market and hurt the Nasdaq stock of the firm's Greg Manning Auctions.
Afinsa staunchly defends the program and says it is doing nothing improper or misleading. It adds that it has never defaulted on a buyback promise in 25 years of business.
The two sets of stamps that Barron's brought to Peña, who heads up the investment program, had been purchased by two representatives of an American hedge fund -- one an American living in Spain, the other a Spanish national. In each case, Afinsa guaranteed a 6% return for the one-year life of the investment -- it even provided a check, dated 12 months in the future, for €36, representing the return. The firm said that, after a year, it would find a buyer for the stamps at the original purchase price or buy them itself.
The hedge fund, it should be noted, has been short-selling shares of Greg Manning since last summer, betting they will decline. But Barron's verified the transactions, examined the contracts and visited the two locations where the stamps were purchased. |
