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A-Mark Precious Metals Bought By GMAI
(July18, 2005) Greg Manning Auctions, Inc., announced today its purchase of A-Mark Precious Metals for $20 million in cash. A-Mark, the largest precious metals company in the US, had projected 2005 sales of some $2.5 billion. $20 million may seem like a bargain, but it's about 10 times A-Mark’s annual earnings.
(A-Mark, of Santa Monica, California, has operated for decades as a full-service wholesale precious metals dealer, and in the interests of full disclosure, I will mention that our parent company, the Coin & Stamp Gallery Inc., has done business with A-Mark for over ten years.)

Steven C. Markoff, former Chairman and CEO as well as founder of APM, stated, "Based on the strong relationships I have built with Greg Manning and Greg Roberts over the years, in addition to their leading industry reputations, Greg Manning Auctions was a strategic fit when the decision was made to sell APM. Spectrum's intimate knowledge of the numismatic and bullion marketplace, combined with our existing client base, provides a number of synergies that can be realized almost immediately. While it is difficult to sell a company that I have founded and chaired for more than 40 years, I am confident the resources available at GMAI will only enhance A-Mark and enable it to achieve even greater success in the future."

Steve Markoff’s A-Mark company made its mark most famously back in 1976, when it accomplished what was then the largest numismatic transaction in history, the purchase of 411,000 pre-1936 silver dollars accumulated by the eccentric LaVere Redfield of Reno, Nevada. Mr. Redfield, a life-long investor in real estate and stocks, put back silver dollars by the 1,000 coin bag back in the 1950s and 1960s when they could be obtained at face value.

Mr. Redfield was a firm believer in ‘hard assets’ rather than money in the bank, and filled his basement with over 11 tons of the old silver ‘cartwheels.’ When he died in 1974, his estate consisted chiefly of thousands of acres of Nevada land, and this now-famous stash of mint-condition silver dollars, including many rare dates from the 1800s still sealed in the canvas sacks in which they left the San Francisco and Carson City Mints in the 19th century.

A-Mark was the high bidder on the Redfield hoard when it came on the market, and a fortune was made in the marketing of it.

Today’s acquisition of A-Mark Precious Metals by Greg Manning Auctions Inc. (symbol: GMAI), a company with some $300 million in gross revenues, will increase projected sales at GMAI approximately eightfold. But the most astounding number to come out of the announcement was that A-Mark’s net profit on 2005’s two and a half billion dollars in gross sales was a mere two million dollars, which works out to a net profit of some 0.08% of sales. To put it another way, in order to hit those numbers, A-Mark had to make about a million dollars in sales every hour that it was open, yet its total after-tax bottom line came to merely $2 million total, or about two hours worth of gross revenue.

If you previously suspected that margins in the bullion trade are slim, this transaction should totally convince you.

Is there any other business field in this country in which a profitable corporation could be acquired for a dollar figure that is less than 1% of that company’s gross sales? No, only in the bullion business could you even imagine such transaction.

So if you ever contact a firm (other than, of course) in an attempt to order gold, silver, or platinum bullion, and you find yourself being steered into sunken treasures, numismatic rarities, or ultra-condition certified modern bullion coins, all at markups unknown, you no longer have to wonder why. It’s simply that a commission salesperson has to sell you a commissionable product. Thus, he will do anything to avoid selling you what, for him at least, is the least profitable item on the planet: precious metals in plain bullion form.

And it’s no wonder, considering that we learned today that the largest precious metals trading house in the US won’t even net one-tenth of 1% in profit on their bullion sales this year.


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