A large gold trading and auction company has moved its headquarters from Connecticut to Irvine as it looks to put some legal problems behind it.
Spectrum Group International Inc. has yearly sales of $4 billion, most from selling gold coins and bars to banks and others that resell them to investors.
The company distributes gold from government mints, generating a lot of revenue but a slim gross profit of 1% on gold trading.
Spectrum also holds auctions of stamps, coins, antique firearms and military collectibles, as well as a wine auction business it is starting this month with a $3 million offering at The St. Regis Monarch Beach Resort in Dana Point.
A few years ago, the company ranked as the third largest auction house in the country behind London-based Christie’s International PLC and New York’s Sotheby’s. It now ranks lower among the top 10 auction houses.
The company has seen fallout from legal problems at two-thirds owner Afinsa Bienes Tangibles SA of Spain.
In 2006, the Spanish government accused Afinsa of running a Ponzi scheme involving stamps. The scheme is believed to have mismanaged the savings of hundreds of thousands of Spaniards.
Earlier this year, Spectrum settled a suit brought against it by the Securities and Exchange Commission that alleged fraud in the stamp scheme. Spectrum settled without admitting or denying guilt.
The company, formerly known as Escala Group Inc., saw its stock collapse in 2006 after Spanish police raided Afinsa. It’s yet to recover.
Spectrum’s shares once traded on Nasdaq but now are on the low-profile Bulletin Board exchange with a recent market value of $70 million.
The company’s legal issues mostly are behind it now, said Chief Executive Greg Roberts, who was hired a couple years ago to turn around the company.
“There are still some potential problems, but nothing we think is significant,” Roberts said.
Earlier this year, Roberts moved the company to Irvine and dropped the Escala name for Spectrum. Before 2005, the company was named Greg Manning Auctions Inc. after founder and stamp collector Greg Manning.
Roberts started a coin trading company in Irvine in 1991 that he sold in 2000 to what’s now Spectrum.
He continued to run the coin trading unit for Spectrum from Irvine. Moving the headquarters here was a consolidation move, he said.
Workforce
About 10 people relocated from Spectrum’s former headquarters in Connecticut, according to Roberts.
The bulk of the company’s workforce is in Irvine where it employs 110 people in 20,000 square feet of office space. The workers trade gold and handle customer service and operations.
An 8,000-square-foot warehouse nearby holds many of Spectrum’s collectibles, including antique guns.
Another 30 people work in offices in Europe and Asia.
Gold Surge
For the 12 months through June, Spectrum’s gold business benefited from a late 2008 price drop and early 2009 surge that spurred more buying and selling.
Its gross profit on gold trading grew more than 200% from a year earlier to $43 million.
More than 95% of Spectrum’s revenue is from gold, which it buys from the mints of governments including the U.S., Canada, Australia, South Africa, China and Austria and sells to banks, coin dealers, jewelers, collectors, investors, refiners and manufacturers.
The company’s smaller business of collectibles sold at auction slumped in the past year with the weak economy.
Sales were down more than 5% from a year earlier to $166 million. Gross profit was cut by about a third to $28 million with a net loss of nearly $8 million.
Spectrum runs live, phone and Internet auctions mostly for stamps and coins as well as guns and armor, which are sold to collectors and dealers.
The company is hoping a new wine auction business will provide a boost.
On Nov. 21, Spectrum plans to kick off the business at the St. Regis with offerings from collector Aubrey McClendon, who cofounded Oklahoma City-based natural gas producer Chesapeake Energy Corp. in 1989.
