Topps: How Do You Do Fellow Kids?

Is the 83 year old card & candy company ready for NFTs?

My wife and I recently bought and moved into our first home. This meant tons of boxes, many of which ended up at Goodwill.

In one of those Goodwill boxes was my baseball card collection from childhood. It included a 1989 Ken Griffey, Jr. Topps rookie card in very good condition.

They brought back fond memories, but better to let another kid enjoy them. Right?

This morning I saw the Topps news and my mind immediately went to that card, so I did a quick Google search.

I almost had a heart attack:

Thankfully, these bad boys are really only going for $25-75, depending on their condition. Otherwise, I would’ve looked incredibly stupid.

Or incredibly philanthropic.


Anyway, on to the real story: Topps is going public via SPAC!

Live look-in at 8 year old me:

Topps x Disney x SPAC

Topps is an 83-year-old manufacturer of collectibles and candy, best known for its baseball trading cards.

Back in 2007, former Disney CEO Michael Eisner bought the company for $385M (through his firm The Tornante Company).

Fast-forward 14 years and he is going all-in on Topps. Literally, the firm is putting 100% of its equity behind this:

The strong emotional connection between the Topps brand and consumers of all ages is truly foundational, and, when combined with our growing portfolio of strategic licensing partnerships, creates a profitable business model with meaningful competitive advantages. Equally important, the management team at the helm of Topps, which we’ve been building for the last 14 years, is outstanding, with deep roots in sports and entertainment, digital, gift cards and confections. With our new partners at Mudrick Capital, Topps will continue its long history of innovation and global expansion, bringing consumers the best of collectibles and confections products while successfully extending into new verticals and emerging categories to take advantage of digital content innovation and high growth opportunities across the globe. That is why I’m not selling a single share of Topps stock in this transaction.

Michael Eisner

Not a single share!

Topps will be going public with the help of Mudrick Capital Acquisition Corp. II ($MUDS) and will trade under the ticker $TOPP.

"We believe Topps’ culture of innovation, strong management team, expanding margins, robust cash flow and conservative balance sheet set it apart from other consumer growth companies. It also is well situated with a universally recognized brand to capitalize on the fast emerging market for collectible NFTs.”

Mudrick Capital


How they make their money

Topps focuses on 4 segments:

  1. Physical

  2. Digital

  3. Gift cards

  4. Edible entertainment (aka confections, bka candy)

As you can see the bulk of their revenue comes from physical trading cards and stickers, thanks to their many licensing deals.

Major League Baseball, Major League Soccer, UEFA Champions League, Bundesliga, National Hockey League, Formula 1, Star Wars, WWE, Wacky Packages®, Garbage Pail Kids®, Mars Attacks®

Their 2020 sales of $567M were a 23% increase from 2019, and the projections through 2022 look juicy.

They only saw $92M in e-commerce sales in 2020, which is disappointing, but a huge improvement from < $5M in 2015.

It also means it’s an opportunity for growth. Silver linings.

If you didn’t know that Topps sold candy until today, you’re not alone. I had no clue they were responsible for some classics:

It ain’t exactly sexy, but it’s good for consistent revenues.

(Also, “edible entertainment” > candy.)

Their digital and gift card businesses are even less sexy. They include games, collectibles, and, well, gift cards. These two make up only ~10% of revenues, but are projected to grow +40% through 2022.

The obvious: NFTs

The obvious question is: Can Topps, 83, capitalize on the NFT craze?

They sort of have already.

Last May they introduced NFT’s for their Garbage Pail Kids collection (i.e. Topps trolling Cabbage Patch Kids in 80’s-90’s).

Honestly, not for me, but they sold out in under 28 hours.

They’ve also taken advantage of Godzilla being hot in the proverbial streets. A drop last week raked in over $500K in just a few hours!

None of those really move the needle for me, though.

For me, collectibles are about connection. It’s about owning a piece of something that has a community around it.

I don’t think Garbage Pail Kids and Godzilla have that.

Do you know what does?

STAR WARS - adults dress up in ridiculous costumes

WWE - tell a wrestling fan it’s fake, I dare you


Those are communities with cult-life followers. And Topps has licensing deals with all of them! Not to mention Formula 1, MLB, and NHL!

Not so fast!!

Topps won’t be able to simply carry its existing physical collectible licenses with major leagues like MLB or NFL into the digital world. The company will likely have to broker new digital-specific business deals, as Dapper Labs did with the NBA. That could be an expensive proposition.

Well, shit.

It’ll probably be expensive, but it’s necessary if they’re going to find any success in the NFT markets.

Luckily Topps has longstanding relationships with all of these leagues/brands so negotiating new deals shouldn’t pose too much of a problem.

For reference, Dapper Labs has shown that it works: NBA Top Shot has already generated over $500M in sales. Though I don’t think those are good numbers to use as a basis for anything - it’s too early in the hype cycle.

Potential NFT Hurdles

Remember what Mudrick Captial said earlier?

It also is well situated with a universally recognized brand to capitalize on the fast emerging market for collectible NFTs.

What I just laid out above is the bull case. In that scenario, Topps’ leverages its “universally recognized brand” and licensing deals to make a splash in the NFT world.

But could that brand turn out to be a double-edged sword?

A bear might say that the type of person who buys NFTs is not the type of person who is inclined to buy anything produced by a corporation, like Topps, with a universally recognized brand.

They might argue that a commercialized product is an antithesis of what NFTs are really supposed to be.

Not to mention digital sales only accounted for 6% of total revenues for Topps last year.

So not only are they pushing digital to customers who apparently prefer physical, they’re attempting to do so in a brand new and incredibly confusing pseudo crypto market.

That’s a tall order.

My take?

I love the juxtaposition of an old company with a presumably impeccable balance sheet, like Topps, slinging digital collectibles next to the Beeples of the NFT markets.

I remain forever skeptical on NFTs, though. Mostly due to the fact that my brain refuses to justify paying USD for a virtual collectible. Regardless of fungibility!

NFTs are here to stay, but the markets won’t be this lucrative for much longer.

And for that reason, I’m out.

More numbers: