Topps: Be Careful Here

 

  • Topps reported Q1 sales that surged 55% to $166.6 million.
  • The sports card market has seen a huge correction since the SPAC deal was announced in April.
  • The stock isn't exactly expensive with a market cap of $1.3 billion, but the company faces a tough road over the next year as card demand slumps.
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Since Topps agreed to a deal with SPAC Mudrick Capital Acquisition Corp. II (MUDS), the market has turned negative on their primary market and this vehicle for going public. Both SPACs and sports trading cards have cooled off in the last couple of months altering the near-term attractiveness of the stock. My long-term investment thesis remains bullish on Topps as a company, but the sports card market weakness is likely to push this stock lower heading into the merger close.

Read the full article on Seeking Alpha. 

Disclosure: No position mentioned. Please review the disclaimer page for more details. 

Update - August 20 
Deal terminated...anyone buying into the SPAC on the initial rally above $15 was burned.  

  • SPAC Mudrick Capital II (NASDAQ:MUDS) and Topps trading cards announced that the companies have mutually terminated an agreement to take Topps public. MUDS shares fell 3.1% in premarket trading.

Update - August 19
News doesn't look good for Topps as Fanatics is set to take the MLB cards license in 2026.

From Seeking Alpha:

-Topps trading card SPAC Mudrick Capital II (NASDAQ:MUDS) fell 2.2% on a report that Major League Baseball and the players union agreed to a new contract with Fanatics, which would replace Topps.
-MLNB and the MLB Players Association signed a new agreement with a new company controlled by Fanatics, according to a WSJ report, which cited people familiar.
-The MLBPA deal begins in 2023 and the MLB's current contract with Topps goes through 2025, according to the report. The new deal is more than 10 times larger than any deal the union has ever signed before.

From Balls & Bells:
-Major League Baseball and the MLB Players Association are set to make a massive lineup change—ending an 70-year partnership with Topps to work with Fanatics on licensed trading cards starting in 2026.

www.ballsandbells.com/...

The stock is trading below $10 in after hours, which could place the SPAC deal in jeopardy. 
Finviz Chart

Update - June 23
Great numbers, but the big question is where the business goes beyond the COVID boom. 55% growth in Q1 turns into only 33% growth for the year so...

-Q1 Net Sales Increased 55.3%
-Q1 Net Income Growth of $23.0 Million to $23.4 Million
-Q1 Adjusted EBITDA* Growth of $23.0 Million to $35.9 Million

Outlook
For 2021, the Company now expects net sales to be in the range of $740 million to $760 million, representing an increase of 31% to 34% over 2020 net sales of $567 million. Adjusted EBITDA*, is now expected to be in the range of $130 million to $140 million, representing an increase of 41% to 52% over 2020 Pro Forma Adjusted EBITDA* of $92 million. 2020 Pro Forma Adjusted EBITDA* and 2021 Adjusted EBITDA* include estimated public company costs of $9 million.

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