April 08, 2015

How much do cancellations matter?

Before the advent of eBay, uncancelled certificates routinely attracted higher prices than those with cancellations. It was not a hard and fast rule, of course, but intermediate and advanced collectors usually sought uncancelled certificates when they could find them. When offered choices, those collectors tended to bid more for uncancelled examples.

That pattern is harder to see today, It seems intermediate and advanced collectors still want uncancelled certificates for their collectors. However, are they backing up their desires with dollars?

If we limit our inquiry to items offered in live auctions from established auction companies, I think the answer is a guarded "yes." Those kinds of companies tend to offer better and rarer material. They are expert catalogers and experts in their fields. They know what their buyers want and they usually dedicate a fair amount of space to descriptions. By necessity, photos in printed auction catalogs are usually too small to see details such as cancellation. Sadly, even though all could offer larger images online, few companies do. On the bright side, auction house images of certificates are always rectangular and properly exposed. Between their photos, descriptions and knowledge of their customers, today's high-class auction houses are able to realize relatively high prices for their items. Uncancelled items seem to command moderate premiums.

EBay, on the other hand is an unfocused marketplace. It offers everything. Seller overburden collectors with loads of ultra-common certificates. Descriptions are typically minimal or non-existent. When sellers do offer descriptions, they tend to be off-topic extracts from Wikipedia that say nothing about certificates. Yes, today's eBay photos are notably larger than auction house images and the quality is improving on average. Unfortunately, the quality of many images is still downright pathetic.

In this setting, I cannot detect any evidence that cancellations affect eBay prices. Period.

Yes, I know professional dealers argue that uncancelled certificates SHOULD be worth more. I agree wholeheartedly!

There is only one problem. EBay pricing behavior does not currently support that assumption.

Since I record prices every day, I can testify with absolute certainty that pricing on eBay is crazy. One day a certificate will sell for $30. A month later, a near identical certificate will sell for $100. A few weeks after that, bidding on another near-identical certificate will struggle to reach $20. There are rarely any visible reasons for such insane price swings.

The truth is that insane price swings are normal on eBay, so it is utterly impossible to quantify the effect of cancellation on prices. Any possible distinction is made greatly more difficult because so few sellers mention cancellations in their meager descriptions. Still, because I retain images from every sale, I can usually identify whether the items sold were cancelled or not when entering records into my database. For that reason, I can tell you with certainty that there is NO PREDICTABLE RELATIONSHIP between cancellation and prices on eBay.

Yes, I still estimate price differences between cancelled and uncancelled certificates in my catalog and will continue to do so. On average, I still believe that experienced collectors willingly pay more for uncancelled certificates. It is just that detecting those price differences on eBay is not possible.


Anonymous said...

Hi Terry, as a long time collector of US RR stocks, I generally prefer uncancelled ones, the major exception to this is stocks that are cancelled by 'transfer' rather than physical pen/cut/hole cancellation and therefore occaisionally have a signature (verso) of an important or interesting person. regards Adam

Terry Cox said...

As I mention in this article, intermediate and expert collectors often seek uncancelled certificates. This article discusses buying behavior on eBay.

Dan Harding said...

The contention that collectors prefer uncanceled certificates and thus there should be a disparity in prices of canceled vs. canceled certificates assumes that all buyers are scripophilists, which is not the case. I collect stock certificates from the Civil War era, but as a revenue stamp collector, so I am interested only in issued certificates with revenue stamps affixed, and focus primarily on the philatelic aspects (stamp and "cancel" in the philatelic sense of the word). Whether the certificate itself is "canceled" with respect to transfer/redemption is of no import and does not factor into the prices I am willing to pay. In fact, the specific stamp used and the (philatelic) cancel used are frequently more important than the certificate itself (I know, I know... "Blasphemy!"). Additionally, stock certificates are also collected by nonscripophilists solely for the certificates' artistic and aesthetic qualities, and may or may not care whether a certificate is canceled.

Terry Cox said...

Dan's point is, of course, spot on. Anytime you put collectors from different hobbies in competition for the same collectible, price behavior becomes unpredictable. There are certainly many documents in "our" hobby that are collected by participants from other hobbies and prices for those specific items will not fit accepted pricing patterns.

Dan explained philatelists' sensibilities and goals better than I can. As I have commented elsewhere, I spot "odd" pricing from time to time that seems explainable only from the perspective of stamp collecting. This is especially true for bonds that carry state revenues. However, I also record odd prices for certificates with "ultra-common" stamps. While not a beginner in either hobby, I suspect some of those certificates or stamps have some sort of features I am blind to.

In a different arena, all certificate collectors are aware that specific autographs dramatically alter certificate prices relative to their rarities. The intersection between autograph collecting and certificate collecting is huge and within areas of overlap, autograph collectors usually drive pricing.

Although I rarely discuss the issue because it seems so obvious, certificates are also collected by railroad enthusiasts. Their interests in collecting documents may have nothing to do certificates and everything to do with company names. The fact that a certificate is cancelled may not be relevant in the slightest.

To carry the investigation a bit further, railroad history buffs may be interested in certificates for the names of specific company officers and nothing else. In such cases, even certificate designs might be immaterial for pricing.

I have written numerous times about specialization in our and other hobbies. One of the more common specializations is collecting by geographic location. Those kinds of collectors are driven to amass anything or everything that carries reference to a specific city, county, state or region. They may focus on one type of collectible, but they almost always end up branching out into others and thereby disrupting typical pricing patterns. Cancellation to them is likely a "so what?" issue.

Now, having made the case for hobby overlap, I nonetheless must question the extent. Take stamps, for instance. How many stamp collectors really purchase and pore over expensive catalogs of scripophily offerings looking for stamps? Better still, how many of those catalogs describe stamps in sufficient detail to make stamps discoverable to philatelists? While eBay illustrations are larger and better than those in any mainline auction catalog, how many ordinary eBay listings describe stamps by Scott number? If stamps are not described, can philatelists discover certificates in sufficient number to disrupt pricing to any measurable extent?

We could ask the same question about certificate prices relative to other overlap hobbies. Other than to speculate that it exists, I certainly have no way of quantifying their effect on pricing. In my opinion, price differences between cancelled and uncancelled certificates are decreasing and in some cases, I can no longer detect predictable price differences between cancelled and uncancelled certificates. I am NOT saying that cancellation no longer matters to all certificate collectors. I am saying that it obviously does not matter to many!

Will that change in the future? I suspect it will, I just don't know when.