Low resale contracts

[E2ME2]

If gets through ROFR then they can flip it for more. If it gets taken by Disney they still make the commission anyways plus the inventory doesn't sit on their site.

So they get commission from the seller,even when they are the buyer ?
Doesn't sound like the best business practice long-term, though.

 

[sethschroeder]

So they get commission from the seller,even when they are the buyer ?
Doesn't sound like the best business practice long-term, though.

Think about it this way:

• Some sellers will back out or sell through another agency if the contract sits for 1,3,7,14 days so you are locking them in and you make $0
• Selling 150 points at $130 or $110 is roughly $240 in lost commission on a commission of $1320 (18% loss)
• Instant sales will normally be in a range of being able to pass ROFR (certain sites update fairly often it seems)
• If the contract sneaks through and you were to sell it again you would have made $4210 after the $110 + $130 sales
• So you are taking a 18% loss on a contract that probably is 50/50 to pass ROFR which would give you a return of like 300% over the course of like 180 days

Might be slightly off but general idea behind it, it would seem.

 

[Ginamarie]

Another one bites the dust. Disney took 250 point BLT contract

That price was too good to be true.

 

[Bing Showei]

You've over-estimated Disney's influence. Yes, it's not 100% free market, because they do help to set the floor. But they refuse only about 1% of contracts.

100% of contracts with a total sale price ending in .33 cents passes ROFR because of 33 Royal Street in New Orleans Square.

I can make up statistics as well. Where are you finding that only "about 1% of contracts" are taken in ROFR? Based on reports from dvcresalemarket.com (I don't see other brokers deviating much lower from these numbers given how hard DVCRM pushes the highest prices among brokers), resale buyback rates have been as follows:

2016 4.4%
2017 6.9%
2018 10.5%
2019 16.3%

It wasn’t my assertion that Disney is intentionally propping up the market. I don’t believe Disney has set that as an objective. It is, however, my position that Disney’s actions, whatever the motivation, effects the market. And like being pregnant, a free market is binary. Either it is a free market with buyers and sellers setting market value, or it’s not.

So chicken or egg, which came first? Did Disney "decide" to lower the resale price, and THEN the resale prices dropped?
OR... what actually happened -- prices kept dropping and dropping, so Disney kept dropping their ROFR price.

You're distorting my point and creating a position I never took. Disney doesn't "decide" to set a lower resale price, they can simply decide to not buy back lower prices, or buy back less. There is an important distinction in this point, as you are painting the picture of Disney actively doing things to manipulate the market. All they have to do is not buy back and the market will start to set its own floor.

You bring up BLT as an example, so let's look at that. Clearly the price on BLT resale has dropped over this past year. In 2019 the average passing price each quarter on the ROFR board was as follows (excluding contracts <100 points or >200 points):

Q1-2019 - $140.11
Q2-2019 - $147.65
Q3-2019 - $142.85
Q4-2019 - $143.38
Q1-2020 - $139.15
Q2-2020 - $136.53
Q3-2020 - $135.02

So if this were true market forces, it would suggest that either demand has dropped for BLT, or supply has increased. Demand seems steady as through 2019 DVCRM reported 354 contracts sold at BLT. Through November 2019, 307 contracts were sold. A 14% drop, but nothing significant and it excludes December sales. There are no indications that sellers have flooded the resale market with BLT contracts.

More interestingly, through 2019 DVCRM reported 88 BLT contracts taken in ROFR. That represents 25% of the 354 contracts sold. Through 2020, DVCRM has reported 14 BLT contracts taken in ROFR. That represents 5% of the 307 contracts sold through November.

When contracts stop getting taken, buyers will test the floor. It doesn't happen overnight, but prices do eventually drop.

Disney sold 31,887 BLT points in 2019. In 2020, they sold 20,071. A 37% Drop. If you exclude Sales from March-July closure, there was actually a 2% increase in BLT direct points purchased, going from 19,167 points sold in 2019 to 19,536 points sold in 2020.

If Disney is only buying the cheapest contracts to re-sell, you would expect to see a commensurate drop in taken contracts (excluding the closure period you would expect the same rate of buybacks), or some correlation between taken contracts and points sold. Instead what you see is that BLT taken contracts at DVCRM for BLT dropped 85% year over year.

When Disney stops buying back, markets test the floor. If allowed to continue testing the floor, prices would eventually drop over time. That's "what actually happened" with BLT.

 

[havoc315]

100% of contracts with a total sale price ending in .33 cents passes ROFR because of 33 Royal Street in New Orleans Square.

I can make up statistics as well. Where are you finding that only "about 1% of contracts" are taken in ROFR? Based on reports from dvcresalemarket.com (I don't see other brokers deviating much lower from these numbers given how hard DVCRM pushes the highest prices among brokers), resale buyback rates have been as follows:

2016 4.4%
2017 6.9%
2018 10.5%
2019 16.3%

It wasn’t my assertion that Disney is intentionally propping up the market. I don’t believe Disney has set that as an objective. It is, however, my position that Disney’s actions, whatever the motivation, effects the market. And like being pregnant, a free market is binary. Either it is a free market with buyers and sellers setting market value, or it’s not.

You're distorting my point and creating a position I never took. Disney doesn't "decide" to set a lower resale price, they can simply decide to not buy back lower prices, or buy back less. There is an important distinction in this point, as you are painting the picture of Disney actively doing things to manipulate the market. All they have to do is not buy back and the market will start to set its own floor.

You bring up BLT as an example, so let's look at that. Clearly the price on BLT resale has dropped over this past year. In 2019 the average passing price each quarter on the ROFR board was as follows (excluding contracts <100 points or >200 points):

Q1-2019 - $140.11
Q2-2019 - $147.65
Q3-2019 - $142.85
Q4-2019 - $143.38
Q1-2020 - $139.15
Q2-2020 - $136.53
Q3-2020 - $135.02

So if this were true market forces, it would suggest that either demand has dropped for BLT, or supply has increased. Demand seems steady as through 2019 DVCRM reported 354 contracts sold at BLT. Through November 2019, 307 contracts were sold. A 14% drop, but nothing significant and it excludes December sales. There are no indications that sellers have flooded the resale market with BLT contracts.

More interestingly, through 2019 DVCRM reported 88 BLT contracts taken in ROFR. That represents 25% of the 354 contracts sold. Through 2020, DVCRM has reported 14 BLT contracts taken in ROFR. That represents 5% of the 307 contracts sold through November.

When contracts stop getting taken, buyers will test the floor. It doesn't happen overnight, but prices do eventually drop.

Disney sold 31,887 BLT points in 2019. In 2020, they sold 20,071. A 37% Drop. If you exclude Sales from March-July closure, there was actually a 2% increase in BLT direct points purchased, going from 19,167 points sold in 2019 to 19,536 points sold in 2020.

If Disney is only buying the cheapest contracts to re-sell, you would expect to see a commensurate drop in taken contracts (excluding the closure period you would expect the same rate of buybacks), or some correlation between taken contracts and points sold. Instead what you see is that BLT taken contracts at DVCRM for BLT dropped 85% year over year.

When Disney stops buying back, markets test the floor. If allowed to continue testing the floor, prices would eventually drop over time. That's "what actually happened" with BLT.

Even if refusal is 5-10%, that’s not enough to be the driver of the market.
No, free market is not a binary absolutely yes or absolutely no. If that were the case — then no free market exists anywhere in the US.
Every market exists on a spectrum of how free or restricted it may be.

Does ROFR affect the market?? Absolutely, of course!!! They can increase demand and reduce supply by exercising ROFR.

But unless Disney suddenly got A LOT more active with ROFR, then the direction of the market is very much controlled by the free market.

BLT, AKV, etc.. prices are down for the simple reason that demand is down and/or supply is up. Which makes perfect sense in a pandemic. (People selling because of their worsening finances or because they can’t use it, demand down because vacation travel is down)

 

[Mumof4mice]

I view Disney as just another potential buyer for that resale contract I want. The contracts are worth more to Disney, because they can add value at no cost (by removing resale restrictions). So they have a higher margin at their disposal, to outbid me. But even in a free market, where sales aren't subject to ROFR, the disparity in purchasing power always exists. Try bidding against connected developers who can have the council rezone orange groves to prime commercial land!

My guess is Disney mainly buys what they can sell and don't want to hold a lot of stock. So there are still opportunities, slipping between the Mouse's fingers, for us small buyers. Mmm, yummy churro crumbs... Don't worry about ROFR, just offer what the contract is worth to you!

 

[sethschroeder]

Even if refusal is 5-10%, that’s not enough to be the driver of the market.
No, free market is not a binary absolutely yes or absolutely no. If that were the case — then no free market exists anywhere in the US.
Every market exists on a spectrum of how free or restricted it may be.

I would also add that IF Disney did not have the ROFR option then they would take a more direct roll either setting a quick sale price or possibly doing blanket offers across the resellers. Disney would possibly even work with resellers to work a system where when sellers get an offer they could shoot a note to Disney for a 24-48 turnaround on a Yes/No that Disney would pay an extra $1/2/3 more per point.

Disney's action is built based on their direct sales and not much more. If prices on resale SSR all of a sudden dropped to $40/point on every contract initially they would get bought, then they would pass, then Disney would likely run an incentive on direct to take advantage of the easy flip and profit.

 

[havoc315]

I would also add that IF Disney did not have the ROFR option then they would take a more direct roll either setting a quick sale price or possibly doing blanket offers across the resellers. Disney would possibly even work with resellers to work a system where when sellers get an offer they could shoot a note to Disney for a 24-48 turnaround on a Yes/No that Disney would pay an extra $1/2/3 more per point.

Disney's action is built based on their direct sales and not much more. If prices on resale SSR all of a sudden dropped to $40/point on every contract initially they would get bought, then they would pass, then Disney would likely run an incentive on direct to take advantage of the easy flip and profit.

Generally agree. If SSR fell to a bunch of $40 contract... Disney would buy up the number they estimate they could flip quickly. They’d grab the $39-41 contracts, while the $42+ contracts slip through.

They definitely -could- use ROFR to establish a floor. But really, they are just a participant in the re-sale market, eating up some of the cheapest contracts. That does give re-sale values a bit of a boost, but price direction is still heavily controlled by basic supply and demand.

 

[smisale]

I purchase AKL for $95 for 185 I lost 2 at the same price just kept trying the two I lost were loaded 450 pts and the one that went through was striped until 2022 didn't matter with corna-virus wasn't going until 2022 anyway