Taken from Edgar On-line and September 30th filing
Greg Manning Auctions, Inc. (the "Company") was founded by Greg
Manning, its Chairman and Chief Executive Officer, who has conducted public
auctions of rare stamps, stamp collections and stocks since 1966. The Company
believes, based on its knowledge of the market, that it is one of the largest
auction houses of rare stamps in the world (although there is no publicly
available data with respect to stamp auction sales). In addition to stamps, the
Company has expanded its business to include other types of collectibles and
similar items, such as sports-related collectibles
The Company conducts its operations directly and through its
subsidiaries Ivy & Mader Philatelic Acutions, Inc. ("Ivy & Mader"), which it
acquired in late 1993, and Greg Manning Galleries, Inc. ("Galleries").
In addition to auctions, which is the Company's primary method of sale,
the Company enters into "private treaty" transactions in which owners of
collectibles arrange to have their property sold to third-parties in privately
negotiated transactions. The Company also purchases collectibles for sale for
its own account.
The Company seeks to provide the highest quality service and personal
attention to its clients. The Company's longevity in its core business of rare
stamps, stamp collection and stock auctions has enabled it to develop an
international network of clients, both dealers and collectors, buyers and
sellers, who use the Company's services on a consistent basis. The Company
believes that its extensive auction and marketing experience in the rare stamp
markets can be applied and utilized in other areas of the collectibles business.
The Company has expanded by taking advantage of such opportunities through its
acquisition of Ivy & Mader and will consider other acquisitions as appropriate.
Philately
Philately, often referred to as stamp collecting, has grown steadily
during the twentieth century. The stamp market is currently worldwide and modern
telecommunications have facilitated the development of an international network
of dealers and collectors who interact regularly to pursue their interest in
philately.
Transactions in the stamp industry are generally effected through
thousands of dealers and auction houses and directly between collectors or
dealers. Because the predominant participants in the long term philatelic
markets are collectors and dealers, and not speculative investors, rare stamps
have historically shown remarkable resilience, not only to stock market cycles,
but to economic conditions in general. Even after substantial declines between
1981 and 1985 (which was caused by speculators' selling investment holdings
following a significant rise in prices during the late 1970's due to speculative
investor demand), prices in the rare stamp market stabilized in 1986 and 1987
and have remained fairly constant since that time.
Rare stamp and stamp collection auctions are the Company's core
business. As a leading philatelic auction house, the Company provides the full
range of services necessary to facilitate the sale and purchase of stamp
collections, dealer stocks, accumulations, sets and single rare stamps. The
Company believes, based on its knowledge of the market, that it is one of the
world leaders in specialized auctions of stamp collections, dealer's stocks and
accumulations (although there is no publicly available data with respect to
stamp auction sales).
Ivy & Mader, acquired in 1993, holds auctions devoted primarily to the
sale of high quality, single rare stamps. In contrast, Greg Manning Auctions,
Inc. ("GMA") typically holds auctions in which each lot may contain several
thousand stamps. Ivy & Mader sells to a larger number of collectors, and GMA
sells to a larger number of dealers. As with GMA, Ivy & Mader earns a
commission, based on the hammer price at auction, of approximately 5% to 15%
from the seller and 15% from the buyer.
Although Ivy & Mader offers potential consignors the opportunity to
sell their rare stamps through auction, private treaty, or by outright purchase,
the potential consignors for Ivy & Mader almost always decide to sell by public
auction. The availability of working capital to make cash advances to the
consignors is a major benefit to Ivy & Mader, as many of that firm's consignors
request cash advances.
As noted above, the Company believes that the combination of GMA with
Ivy & Mader creates one of the world's largest combined philatelic auction
houses, and provides a competitive advantage to the Company through the
complementary nature of the two companies' distinct specialty areas. Because of
the relative sophistication of the operations and computer support of the two
firms, the Company believes that significant efficiencies may be obtained by
combining the two systems, and taking the best features from both systems. The
resulting operating system and computer related auction support system may be
replicated many times over for use by other auction firms that are acquired or
merged into the Company's combined operations.
Galleries is engaged primarily in the business of conducting stamp
auctions by mail. Until recently, Galleries was engaged in the business of
auctioning antiquities collectibles, under its own name and the name of Harmer
Rooke Galleries. During the year ended June 30, 1997, the Company determined
that Galleries should refocus its business in the area of mail stamp auctions
and Galleries held several such auctions during the year. In addition, in July,
1997, Galleries acquired the assets of Cee-Jay Stamp Auctions, Inc., a company
engaged in the stamp mail auction business. (The Company is currently
liquidating the remainder of its inventory of antiquities.) Galleries also
occasionally conducts auctions of historical items, including rare autographs
and documents.
The Company's founder, Chairman and Chief Executive Officer, Greg
Manning, has been in the business of buying and selling stamps full time since
1964 and began to conduct public stamp auctions in 1966. Mr. Manning is a member
of numerous philatelic organizations throughout the world and is a regular
columnist for Linn's Stamp News, the largest stamp publication in the United
States.Sports Trading Cards and Sports Memorabilia
Recognizing the growing interest in sports trading cards and sports
memorabilia, the Company broadened its business in November 1991 to include the
sale of such sports collectibles. The sports collectibles industry is relatively
new and immature, when compared to philately and certain other more traditional
collectibles such as rare coins and antiquities. However, it has grown rapidly
in recent years, with the emergence of price guides and hobby magazines, and
appears to be continuing to experience increasing collector interest.
Management believes that the Company can apply its expertise in the
rare stamp auction business to facilitate continued expansion in its sports
trading card and memorabilia auction business. The Company does not anticipate
significant difficulty in obtaining desirable amounts of sports trading cards
and sports memorabilia for sale, even though it will generally focus on pre-1980
manufactured cards, which are typically more scarce and expensive than more
recent cards and memorabilia.
Client Services and Methods of Sale for Collectibles Owners
The Company's business depends on its ability to attract owners of
collectibles who desire to sell their property at auction or by private treaty.
The Company seeks to provide the highest quality service to such owners,
providing them with an efficient and secure means by which to sell their
property. The Company's ability to provide quality service to its clients on a
consistent basis has enabled it to develop long-standing relationships with many
professional dealers and collectors and to develop a reputation in the industry
for client service. The Company enjoys repeat business and receives a
substantial amount of business as a result of referrals. In addition to its
industry reputation, the Company relies on advertising in trade publications to
promote its services to potential clients, such as professional dealers,
collectors, and estate administrators.
The Company is able to offer most clients several options for the sale
of their property. An owner desiring to sell property may choose to (1) consign
it to the Company for sale at auction to the highest bidder, (2) place it with
the Company under a private treaty for sale at a price negotiated by the Company
with a buyer, or (3) sell it directly to the Company for a negotiated price. The
Company has available to it a staff of experts who are knowledgeable in many
areas of collectibles, and who are able to make reasonable estimates of the
price at which an item may be expected to sell at auction or privately. The
Company's experts can examine an owner's property and furnish a presale auction
estimate, which represents the Company's opinion of the current value of the
property based on recent selling prices of similar properties, and the quality,
rarity, authenticity, physical condition and history of prior ownership of the
subject item. These capabilities permit the Company to assist a client in
deciding the appropriate method of sale.
Generally, an owner desiring to use the Company's services to sell
property at auction or by private treaty will deliver the property to the
Company on a consignment basis, contracting with the Company to sell the
property to the highest bidder. The Company and the consignor will enter into a
written contract which sets forth the terms and conditions of the consignment
with respect to settlement, commissions and cash advances, if any, and the
determination of the authenticity of the property. The Company will hold
consignment property until the next regularly scheduled auction sale, or if the
sale is to be by private treaty, for no longer than six months. With respect to
private treaty sales, if the consigned property is not sold within the agreed
upon price parameters during such time, the Company will inform the owner of the
situation and provide the owner with the following options: (a) continue for
another period under a private treaty arrangement at the existing or at new
price parameters, (b) consign the property for sale at the next auction, (c)
sell the property outright to the Company at a price determined by the Company's
experts, or (d) have the property returned.
The Company's range of client services for owners also includes making
necessary arrangements for the pick-up and transport of property (fully insured
for loss or damage) to the Company's vault for storage and safe-keeping, and all
matters relating to displaying and promoting the property to potential buyers.
Certain aspects of these services are discussed in more detail in the following
subsections.Auction Sales
The Company sells property primarily by public auction. Selling by
auction generally provides owners the opportunity to realize the highest sales
price available in the market, although there is always the inherent risk that
the auction price may not be as high as a property owner expected or desired. At
public auction, the Company generally earns a commission from the seller of 5%
to 15% and a commission of 15% from the buyers. The Company earns a commission
from the buyers of 10% to 15% in all of the Company's markets.
One key to reducing the risks associated with the auction process for
property owners is achieving high levels of participation in the auctions by
potential buyers. Through the use of print advertisements in Linn's Stamp News
and other industry publications, the Company advertises its stamp auctions to
potential purchasers. For sports trading card and memorabilia auctions, the
Company advertises in Sports Collectors Digest and other major trade
publications. In addition to advertisements, the Company promotes each auction
through advance distribution of a catalogue for that auction to customers on the
mailing lists of the Company and to potential customers who respond to the
Company's advertisements and appearances at trade shows. Each catalogue
describes and often depicts the items to be sold at auction, contains the
Company's estimates of prices to be realized for each item, and depending on the
market, may be produced in full color.
Auctions are generally open to public bidding and, in an effort to
increase international participation at auctions, the Company has facilities for
bidding by mail and facsimile, which may be done prior to auction. Thus,
although the Company's auctions take place primarily in New Jersey, New York and
Maryland, purchasers and sellers throughout the world are able to participate at
the auctions.
The Company manages three types of auctions: (1) live auctions; (2)
mail and absentee auctions; and (3) telephone auctions. The type of auction
utilized for each sale is determined in advance of such auction, and the
decision on which type of auction to use is made based on a variety of factors
including the type of property to be sold, the market into which the property
will be sold, the size of the auction, and other factors. In each type of
auction, a catalogue or list of lots is mailed and otherwise distributed to all
interested customers in order to facilitate the bidding process by providing
descriptions of each lot by lot number.
In a live auction, bidders may bid in person or by telephone on each
lot as presented in the order shown in the catalogue at the time and date of the
auction. Before the auction, bidders may bid by lot as shown in the catalogue
and communicate such bids to the Company by mail, fax or by telephone. At the
auction, the auctioneer typically opens the bidding at levels based on bids
received prior to auction. The property being auctioned is sold to the highest
bidder, whether such bid was received before the auction or at the time of sale,
and such highest bidder must pay the hammer price, the applicable buyer's
premium and applicable sales tax. The auctioneer regulates the bidding and
reserves the right to refuse any bid believed by him not to be made in good
faith.
In an absentee auction, bidders may bid on each lot as shown in the
catalogue and communicate such bids to the Company by mail, fax and telephone
before the auction. At or about the closing date of the auction (as published in
the catalogue), the bids are compiled and ordered by lot, from highest to lowest
bid. In certain instances on certain lots, bidders are contacted with current
bid information on such lots, providing the bidders an opportunity to increase
the bids previously submitted. Once all bids have been received, posted and
finalized, the Company, acting as an agent for each bidder, determines the
highest bid on each lot as authorized by the bidder (up to the maximum limit as
authorized by the bidder) in an increment over the next highest bid as described
in the auction catalogue. The highest bidder on each lot is declared the winner,
and such bidder must pay the winning bid plus the applicable buyer's premium and
applicable sales tax.
In a telephone auction, bidders may bid on each lot as shown in the
catalogue and communicate such bids to the Company by mail, fax and telephone
before the auction. On the date of the auction, beginning usually 3-4 hours
before the published time of the end of the sale, the Company receives inquiries
by telephone from bidders and prospective bidders about current bids on specific
lots. During these telephone inquiries, the caller directs the Company to enter
or modify the caller's bids on such specific lots. At the end of the specified
time period, the highest bid on each lot is declared the winner and, as in other
types of auctions, the successful bidder must pay the winning bid plus the
applicable buyer's premium and applicable sales tax.
The costs involved in conducting a typical auction include, among other
things, the cost of catalogues, insurance, transportation, auction advertising,
auction site rental fees, security, temporary personnel and expenses of certain
additional auction-related accounting and shipping functions. In general,
purchasers at public auctions pay a buyer's premium on auction purchases equal
to 10% to 15% of the hammer price of the property and sellers are charged a
commission of 5% to 15%, or slightly lower on high value properties, of the
hammer price.
The Company does not provide any guarantee with respect to the
authenticity of property offered for sale at auction. Each lot is sold as
genuine and as described by the Company in the catalogue. However, when, in the
opinion of a competent authority mutually acceptable to the Company and the
purchaser, a lot is declared otherwise, the purchase price will be refunded in
full if the lot is returned to the Company within a specified period. In such
event, the Company will return such lot to the consignor before a settlement
payment has been made to such consignor for such lot. To date, returns have not
been material. Large collections are generally sold on an "as is" basis.
After an auction, purchasers must make arrangements to take possession
of the auctioned property. The Company generally forwards the property to its
buyer by mail unless other arrangements are requested. As agent of the
consignor, the Company bills the buyer for property purchased, receives payment
from the buyer, and remits to the consignor at the settlement date the
consignor's portion of the buyer's payment, less consignor cash advances, if
any, and commissions payable to the Company. The Company often releases property
sold at auction to buyers, primarily dealers, before the Company receives
payment, permitting such buyers to take immediate possession on an open credit
account basis (within established credit limits) and to make payment generally
within 30 days. Whether or not the Company has received payment from such well
established customers, it must pay the consignor and generally will do so not
later than the contracted settlement date (generally 45 days after the sale of
the consignor's property). In instances where the buyer has not paid as of
settlement date, the Company assumes all risks of loss and responsibility of
collection from the buyer. A lot which has been submitted by mutual consent of
the buyer and the Company for review by a competent authority is not considered
to be released to the buyer and settlement is not completed with the consignor
until such time as an opinion is rendered by such competent authority. If the
lot under review receives an affirmative opinion from such competent authority,
the settlement is immediately completed, and the applicable amount is paid to
the consignor. If such lot is returned to the Company with a negative opinion
from such competent authority, no sale is deemed to have occurred, and the
property is returned to the consignor in satisfaction of the consignment
agreement between the consignor and the Company.
Extending credit to credit worthy buyers at auction is an important
marketing tool for the Company because it allows buyers who may not have
immediately available funds to settle at auction, the opportunity to settle at a
later date. The Company will generally extend credit only to buyers who have
done business with the Company in the past and have an established credit
standing in the industry.
When the Company does not grant credit to a buyer, under the standard
terms and conditions of the Company's auction sales, it is not obligated to pay
the consignor of the property if it has not been paid by the buyer. In such
instances, the Company holds auctioned property until it receives payment from
the buyer. If the buyer defaults on payment, the Company may cancel the sale and
return the property to the owner, re-offer the property at another auction, or
contact other bidders to negotiate a private sale.
This was before they bought out Teletrade. Now consider the online option. |
