Is there liquidity in the market for rare Mandela R5 coins?

[alloway65 10]

An abbreviated Moneyweb article.

JOHANNESBURG – Is there sufficient liquidity in the market for rare Mandela R5 coins?

Moneyweb previously reported that a reader who purchased a rare Mandela R5 coin from SA Coin Corporation has been struggling to sell her coin. In the article industry commentators questioned the rarity of the coins and warned against the purchase of these coins as investments.

In a reply to Moneyweb published on its website, SA Coin says it has sold coins worth over R125 million over the past five years.

“It is therefore very humorous to suggest that we would have any difficulty in selling any Mandela coins,” Mark T Andersen, chairperson and chief executive officer wrote. Andersen’s full response can be read here.

 

[TABLE=class: MsoNormalTable]

[TR]

[TD] Date bought[/TD]

[TD] Description[/TD]

[TD] Paid[/TD]

[TD=width: 142] Date placed on mandate[/TD]

[/TR]

[TR]

[TD=width: 149] 30 July 2010[/TD]

[TD=width: 161] 2008 PR69 DCAM[/TD]

[TD=width: 116] R65 000[/TD]

[TD=width: 142] Not on mandate[/TD]

[/TR]

[TR]

[TD=width: 149] 8 October 2008[/TD]

[TD=width: 161] 2008 MS67 (x 2)[/TD]

[TD=width: 116] ??[/TD]

[TD=width: 142] 7 March 2013[/TD]

[/TR]

[TR]

[TD=width: 149] 3 September 2010[/TD]

[TD=width: 161] 2000 PR66 DCAM[/TD]

[TD=width: 116] R44 000[/TD]

[TD=width: 142] 7 March 2013[/TD]

[/TR]

[TR]

[TD=width: 149] 3 September 2010[/TD]

[TD=width: 161] 2000 MS64[/TD]

[TD=width: 116] R28 000[/TD]

[TD=width: 142] 7 March 2013[/TD]

[/TR]

[/TABLE]

After enquiring about the progress in selling the coins, Ridley received the following e-mailed response from Corien Badenhorst, an accounts manager at SA Coin in October last year:

“We do apologize for the wait but we are behind on all the mandates as we had no one dealing with them last year. We are still trying to sell mandates that’s been on mandate for more than 2 years now. It’s been a slow year and the markets are very low.”

Ridley has since approached SA Coin for feedback on the progress in selling the coins several times, but was informed that there is “no news” about the coins.

In February this year, Badenhorst replied: “…unfortunately I can’t give you a time or date when it will be sold. I was told we do not buy these coins back, we offer this services to help the clients but do not guarantee any results.”

Gareth O’Connor tells a similar story. His coins (summary below) are all on mandate to sell at SA Coin, but have yet to be sold.

[TABLE=class: MsoNormalTable]

[TR]

[TD]Date bought[/TD]

[TD] Description[/TD]

[TD] Paid[/TD]

[TD=width: 142] Date placed on mandate[/TD]

[/TR]

[TR]

[TD=width: 149] 9 September 2008[/TD]

[TD=width: 135] 2008 MS67 90^thbirthday x 3[/TD]

[TD=width: 142] R5 500 each x 3 = R16 500[/TD]

[TD=width: 142] 3 April 2013[/TD]

[/TR]

[TR]

[TD=width: 149] 9 September 2008[/TD]

[TD=width: 135] 2008 MS65 90th birthday x 3[/TD]

[TD=width: 142] R750 each x 3

= R2 250[/TD]

[TD=width: 142] 3 April 2013[/TD]

[/TR]

[TR]

[TD=width: 149] 25 July 2008[/TD]

[TD=width: 135] 2000 MS64 set[/TD]

[TD=width: 142] R8 500[/TD]

[TD=width: 142] 3 April 2013[/TD]

[/TR]

[TR]

[TD=width: 149] 25 July 2008[/TD]

[TD=width: 135] 1994 PF69[/TD]

[TD=width: 142] R45 000[/TD]

[TD=width: 142] 3 April 2013[/TD]

[/TR]

[/TABLE]

Another client, Sheldon Artman, also put his year 2000 Mandela R5 PF67 coin on mandate in August 2011, after buying the coin in May 2006, but has had no luck in selling it.

Clients have now become concerned that they were misled about the true potential of these coins as investments.

Liquidity

In a document on rare coin investments (the complete document can be downloaded here), it says (selected pieces quoted):

“The high degree of liquidity is determined by rarity, market and the grading of a coin.”

“Coins are placed on mandate to sell. The same you would your property. We will sell the coins that our clients have purchased from us ensuring that at the right time, for them at the best international price paid with the highest profit earnings.”

“Most investors seem to place great emphasis on the purchasing of a coin. We advise you to look at things differently. The emphasis should be placed on selling even before you buy a coin. After all, if a coin does not have a promising future and a demand when it comes time to sell, why buy it? The point is coin liquidity is not a problem when you are dealing with the South African Coin Corporation when the time comes for you to put your coins up for sale with mandate with us. We are the largest South African rare coins dealer in South African and the world.”

On investment performance it states: “Investment in rare coins are unaffected by the stock market, spot prices on precious metals, economic and political developments offering you stability in your investment.”

SA Coin suggests to all clients to hold onto their coins for three to five years.

SA Coin responds

Eion Blignaut, senior broker at SA Coin Corporation, says the company has around 5 000 to 6 000 coin buyers on its database.

When a client decides to place a coin on mandate, brokers will look at their client base to see if there is somebody that would be interested in buying the coin. The intention with all clients is to put a set of six coins together – the three coins that were minted for former president Nelson Mandela in 1994, 2000 and 2008 in proof and mint state format, he says.

Blignaut says there is no guarantee that they can sell a coin – if there is an oversupply of the specific coin, the coin will not be sold quickly or the client might get a very low offer.

SA Coin earns a commission of 10% on coins sold on mandate.

Asked how many coins it currently has on mandate to sell, Blignaut said it was impossible to answer as it changes on a daily basis.

“Let’s put it this way, out of the 6 000 clients we have, there is very few of them that have their coins on mandate because most of them abide by the… well not the instructions… abide by the arrangement that we made with them right at the beginning as to say that you have to keep your coins for at least five years.”

Blignaut says one also has to remember that the local economy is struggling at the moment and the market is slow.

Asked how many mandated coins it managed to sell in the past three years, Blignaut said they “keep on selling them all the time”.

“The coins come and go all the time, there’s no number figure that I can give you. I mean we don’t keep track of them.”

“Let me put it to you this way, it will not pay SA Coin to try and find that information because we’re not gonna get any money out of it. So why do it?”

Blignaut says right now the main reason some clients might be struggling to sell their coins is the economy. Selling would also be affected by the rarity of the specific coin.

He says in total around 11 000 of the year 2000 Mandela coins in proof and mint state have been graded internationally by American grading companies.

But of the year 2008 coins, over 250 000 were graded and they are therefore not as rare as the year 2000 or 1994 coins.

Blignaut says the market is not a coin dealer market anymore, but has expanded into a massive internet-based market. If SA Coin can’t sell a coin, any client can sell the coin himself.

Edited June 9, 2014 by alloway65

[Pierre_Henri 65]

Everyone has been warned on this forum since way back when ...

 

SA Coin Corporation has allegedly been ripping of customers since way back when: -- but on this forum, luckily, readers have been warned a gazillion times ...

 

http://forum.bidorbuy.co.za/coins-notes-numismatist/19455-how-do-i-determine-approximate-value-2008-nelson-mandela-r5-coin.html

http://forum.bidorbuy.co.za/coins-notes-numismatist/19442-investors-r5-mandela-coins-ripped-off.html

http://forum.bidorbuy.co.za/coins-notes-numismatist/19076-mandeliana-hard-times-ahead.html

http://forum.bidorbuy.co.za/coins-notes-numismatist/19002-2008-mandela-birthday-coins.html

http://forum.bidorbuy.co.za/coins-notes-numismatist/18690-2000-mandela-smiley-mintage-numbers.html

http://forum.bidorbuy.co.za/coins-notes-numismatist/18670-all-due-respect-another-zillion-mandela-r5-coins-horizon.html

http://forum.bidorbuy.co.za/coins-notes-numismatist/18533-bargain-year-ms66-mandela-90th-birthday-coin-only-r499-00-saving.html

http://forum.bidorbuy.co.za/coins-notes-numismatist/18471-mandela-2000-proof-coins.html

http://forum.bidorbuy.co.za/coins-notes-numismatist/18418-south-african-mandela-coins-mint-state-prooflike-proof.html

http://forum.bidorbuy.co.za/coins-notes-numismatist/16326-mandela-coins-big-crash-coming.html

http://forum.bidorbuy.co.za/coins-notes-numismatist/15887-mandela-coins-exposed.html

http://forum.bidorbuy.co.za/coins-notes-numismatist/14617-groupon-mandela-coin-deal-ripoff-2008-r5-ms66-r1232.html

[jwither 16]

What a bunch of self-serving comments by the SA Coin Co.

 

To the question of whether there is liquidity in the market, it depends. Obviously, there is liquidity at some price, but somehow, I have the sneaking suspicion that it is at a much lower one than the price the seller wants. Since the NGC census is almost 38,000 for a 90th BD and over 200,000 in total, I rate the chances as zero that the buyer in the above example will ever get their R5500 back through a "mandate". I don't see why this coin should be worth more than the $16 grading fee or about R160 and at this time, I suspect it is worth only somewhat more.

 

I would also like to know what the SA Coin Co told its buyers at the time the coin was bought. I doubt they were telling the buyer to think about selling the coin later. No, because that would have caused some of the suckers to change their minds.

 

The idea that the SA Coin Co. does not know how many they have actually brokered seems absurd. They either know and don't want anyone else to know or just don't want to tell their customers. It sure seems like it is relevant to me. Because if it isn't, why would anyone buy from them again, ever?

 

This has the potential to end badly not just for the customers of the SA Coin Co but for many others. In the United States in the past, I have heard periodic rumors that either the states or federal government were going to regulate the sale of coins as "investments". It has not happened - yet - to my knowledge but this is the kind of behavior that leads to it. The regulation would like take the form of requiring coin dealers and brokers to register as investment advisors with the SEC, state regulatory agencies or both. The regulations would contain requirements for disclosures and likely client suitability,; that is, whether it was appropriate for the customer to buy what was being offerred.