Welcome to Cultural Assets Insider. We use Moneyball tactics to discover undervalued, mispriced, and hidden gems in Fractional Investing.
Today, we’re covering the investment opportunities for Transformers Toys:
- Optimus Prime 1984 Transformers G1 Pepsi Edition AFA 85
- An early arbitrage opportunity
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Optimus Prime 1984 Transformers G1 Pepsi Edition AFA 85
About the Asset
This is an Optimus Prime Transformer toy from 1984 / 1985 that’s still in its box. This particular variant was a mail-away promotion exclusively through Pepsi and was only available in North America. It features a small fold-out leaflet glued to the top-right of the packaging and contains two Pepsi stickers that were meant to be slapped on Optimus’s side paneling.
The Canadian version features larger stickers than the American version, but it’s unclear from the offering which version we’re dealing with.
This piece is graded AFA 85. The AFA (Action Figure Authority) scale is similar to SGC for sports cards, CGC for comics, and VGA for video games. In fact the same company owns both AFA and VGA (Video Game Authority).
It’s on a 10 – 100 (1 – 10) scale with the increments getting smaller as it gets closer to the top grade. A score of 85 is Near Mint +. Go ahead an familiarise yourself with the Action Figure Authority grading scales.
A total of 54 of these Optimus Prime items have been submitted to AFA with 21 receiving a grade of 85. There are four higher, all at 90. I honestly can’t believe 54 of these stayed in their packaging.
About the drop
This asset will drop on Otis 6th July 2021 at noon EST with a market cap of $10,600. It will be locked up for around a month before trading quarterly.
Add IPO to calendar
About Transformers and Optimus Prime
The Transformers franchise has generated over $30B in revenue (non-inflation-adjusted) since its inception in 1984. That puts it just outside the top ten right behind Harry Potter and Nintendo’s Mario.
The franchise had a bit of a lull from 1987 to 2007 in the US, so if you’re Gen X, you probably most associate Transformers with the toys and cartoons in the 1980s. Millenials are likely more familiar with the live action films starting in 2007. The party never really stopped in Japan, however, where a total of twenty-five (25!) different Transformers Series’ ran from 1984 through to 2021 (present).
The mecha toy line was launched by Takara and Hasbro in Japan and America, respectively, in 1984.
A couple fun facts about the Generation One series of toys:
Hasbro hired Jim Shooter and Dennis O’Neil from Marvel to create a backstory for the robot toys, and a media franchise was born.
To save money, many of the toys share chassis and are only differentiated by colouring or accessories. Optimus Prime’s and Ultra Magnus’ cab section are functionally identical to one another.
After its initial run slowed in 1987, the next big push in the American market came with Michael Bay’s live action films starting in 2007.
To date, there have been six live action films, though Bay is no longer at the helm. Another, Transformers: Rise of the Beasts, is slated for summer 2022. They’ve grossed nearly $5B worldwide, though each of the last two films have returned less than expected.
Recent sales history and Valuation
Otis has access to a database of private sales for these types of items, and they list out some sales I couldn’t find anywhere online:
- March 2021: $9,500 – AFA 85
- October 2020: $8,200 – AFA 85
- July 2020: $11,400 – AFA 90
I found these sales as well:
- August 2019: $2,111 – AFA 80
- September 2019: $1,900 – AFA 75
They bought the item from eBay for $10,080 late May 2021.
Based on the March sale of $9,500, $10,080 represents a 6% increase over two months, and a quick look on eBay recent sales tells me these toys are continuing to appreciate. I think a 10% appreciation on their purchase price is probably fair given it’s been a couple of months.
Inferred value is $11,000
Verdict
I like this one. It feels a *bit* like the iPhone Otis IPO’ed a few weeks ago. It’s a decent valuation, it has strong cultural relevance that’s tangible across two generations, and it’s reasonable new to market.
Disclosure – I’ll probably buy shares of this
Other ways to invest in Transformers
I think there’s still some opportunity to achieve some arbitrage if you buy these items in the box and send them off to AFA for grading.
This asset class is even more wild west than video game cartridges, and the grading agency is even more…let’s say…rustic.
Complete toys can be found intact in the box for around $500, and decently-graded options sell for 10x that (the Pepsi variant goes for more).
Check out Optimus Prime options.
Megatron, the leader of the Decepticons (the baddies), sells for as much if not more than Optimus Prime. I found an AFA 80 Megatron that went for $8k in mid-2019 (4x what an AFA Optimus went for around the same time). These ones, intact in the box, can be had for less than $1,500 on eBay.
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