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Short-selling tickets draws scrutiny

ASC Tickets Co., a Maryland-based ticket broker, lost about $2 million in short-selling tickets for Super Bowl XLIX last year in Arizona. And they’re OK with that — sort of.

The brokerage operated in the oft-debated industry practice of short-selling tickets, in which a seller lists a ticket he does not yet physically possess, receives a commitment from a buyer, and then fulfills that order later when ticket prices are lower. Such arbitrage seeks to take advantage of typical marketplace dynamics for sports tickets in which resale prices fall as an event approaches and the perishable nature of the ticket becomes more prominent.

Some brokers lost money last year when last-minute prices spiked at Super Bowl XLIX.
Photo by: Getty Images
The practice has drawn scrutiny from major resale marketplaces such as StubHub and Ticketmaster’s Ticket Exchange, which are concerned that fans can get left empty-handed.

ASC Tickets has used short-selling tactics for more than a decade and has generated more than $1 million in profits from the Super Bowl alone because of it.

Last year’s Super Bowl, however, presented a perfect storm of market factors that severely constricted supply in the days leading up to the game, and quickly sent tickets previously selling for less than $3,000 each well beyond $10,000. ASC Tickets was forced to fulfill its prior orders at a substantial loss.

“It was a tough situation but we still fulfilled all our orders and were still profitable for the year,” said Lee Shenker, ASC Tickets vice president and general counsel. “If you’re going to do this, you have to have the wherewithal to cover your losses if they happen. It’s not for the faint of heart.”

Many fans dealing with other brokers and marketplaces were not so lucky. At least several hundred purchasers of Super Bowl XLIX tickets by unofficial measures found their orders reneged upon as a result of short-selling gone bad, and did not receive their purchased tickets at all, requiring a widespread distribution of monetary guarantees back to buyers.

As a result, StubHub, Ticketmaster and most other resale marketplaces have since tightened their selling rules and

sought to discourage short-selling by requiring more advance disclosure of specific ticket locations, and in some cases, a firm ticket in hand instead of merely listing broader categories of seats.

A handful of large, well-capitalized sellers such as ASC Tickets receive occasional waivers on these restrictions based on their ability to still fulfill orders. But broadly speaking, last year’s market meltdown in Arizona has led to a significant reduction in short-selling.

The practice, however, has not and likely will not disappear entirely. For the Super Bowl specifically, many tickets are not distributed by the NFL to stakeholders such as individual teams until only a few days before the game. Such late delivery of tickets still presents a fertile landscape for speculative selling in advance of that. Many other major events on the sports calendar also attract sellers looking to make a short-term market around tickets.

“There are a lot of horror stories out there with the speculators, but at the end of the day, this is a reputation-based business, and you have to stand by your word,” said Jim Holzman, chief executive of Boston-based Ace Tickets.

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