Michael Rubin’s sports platform company Fanatics is selling its 60% stake in NFT company Candy Digital, according to an internal email obtained by CNBC.
According to the email, Fanatics, who previously held a majority stake in Candy Digital, will sell its interest to a group of investors led by Galaxy Digital, a crypto merchant bank led by Mike Novogratz, as a shareholder. other original founders.
Fanatics declined to comment.
The old Digital Candy is established in June 2021 in the midst of the sports NFT boom, competing with companies like Dapper Labs in digital sports collectibles. One of its first efforts came from a multi-year license agreement with MLB to create non-fungible tokens, including an exclusive Lou Gehrig NFT. It also released digital collection with Netflixstrange things, WWEand several Nascar teams.
However, like the broader NFT market, the sports NFT also saw a drop amid the ‘crypto winter’ that saw the value of nearly all digital assets decline. Dapper Labs, the company behind the NBA Top Shot and NFL All Day digital trading platforms ranked 9th on last year’s CNBC 50 Disruptor list, laid off 22% of companies in November.
Candy Digital raised a $100 million Series A round in October 2021, valuing it at $1.5 billion at the time. Investors in that round include Soft bank‘s Vision Fund 2, Insight Partners, and Pro Football Hall of Famer Peyton Manning, as previously reported by CNBC.
It’s unclear what Fanatics will receive from its stake in the company, but Rubin wrote, “Our divestment at this time allows us to ensure investors can recoup the majority of their investment.” invest their money in cash or additional shares in Fanatics – a favorable outcome for investors, especially in a booming NFT market that has seen a dramatic decline in both trading volume and prices of independent NFTs.”
Rubin cited several factors that led to Fanatics’ divestment in an email, which he wrote was a “quite simple and easy decision for us for a number of reasons.”
“Over the past year, it has become clear that NFT is unlikely to be sustainable or profitable as a stand-alone business,” Rubin writes. “Besides the physical collectibles (transaction cards) that make up 99% of our business, we believe that digital products will have more value and convenience when connected to the things that are sold. physical collectibles to create the best experience for collectors.”
In January 2022, Fanatics buy Topps transaction card for about 500 million USD after also acquiring the rights to manufacture MLB trading cards, severing a nearly 70-year partnership between Topps and baseball’s premier league.
fanatics grow up $700 million in new capital in December, which aims to use that new money to focus on potential merger and acquisition opportunities across its collection, betting and gaming businesses. It also pushed the company’s valuation to $31 billion.
The company, which started out as an e-commerce platform selling team merchandise to sports fans, has sought to expand across the entire sports ecosystem. The company is also considering an initial public offering, and Rubin recently met with more than 90 internet, retail and gaming analysts from various Wall Street firms, where he talked about the company’s growth plans. Fanatics, as previously reported by CNBC.
Fanatics, a three-time CNBC Disruptor 50 company, has 21st place on last year’s list.
Here’s the full email Rubin sent to Fanatics employees on Wednesday:
Fanatical group –
Happy New Year. I hope everyone had a chance to recharge and spend quality time with family and friends over the holidays, and that your 2023 is off to a great start.
As we get back to the wheel of things, I wanted to share some news with you all. Effective immediately, Fanatics has divested approximately 60% of our stake in Candy Digital. We sold our interest in the NFT company to a group of investors led by Galaxy Digital, another original founding shareholder. When we consider all the factors across the board, this is a pretty straightforward and easy decision for us for a number of reasons.
Business Model – NFT will most likely emerge as an integrated product/feature rather than a standalone business: Over the past year, it has become clear that NFT is unlikely to be sustainable or profitable as a stand-alone business. In addition to physical collectibles (trading cards) which make up 99% of our business, we believe that digital products will have more value and utility when connected to physical collectibles to create best experience for collectors. To that end, we’ve taken on a broader and more important NFT and digital collection rights in the Fanatics Collection business that comes with our trading card rights ( NFL, MLB, NBA, etc.), which we are integrating seamlessly with the world-class physical collectibles we currently have. Ultimately, our goal is to increase the number of sports collectors. The connection between physical and digital collections will be the most effective way to create emotional resonance and long-term success for the NFT and its collectors.
Investment Relations: Taking this immediate action not only makes sense for Fanatics’ strategic direction, but it also allows us to maintain an integrity relationship with our investors. Investors in Candy bought into the vision not because of NFT or Candy itself, but because of our record at Fanatics. This proven achievement is the result of your hard work and our alignment in our mission to build the leading global digital sports platform. It is therefore imperative that we protect their investments as the market and financial environment changes. The divestment at this point allows us to ensure investors can recoup the majority of their investment in cash or additional shares in Fanatics – an outcome favorable to investors. Investors, especially during the booming NFT market, have seen a dramatic drop in both trading volume and price for the standalone NFT.
Cultural integration: Similar to how quickly we mobilize when the right acquisition or strategic partnership emerges, we act even faster when we realize things aren’t working. One of our core values – A fanatic…Winning as a team – is integral to our success and works only when we can leverage the collective wisdom and expertise of all our teams and colleagues. Unfortunately, we were never able to achieve full integration of Candy within the Fanatics environment or culture due to competing stakeholders and goals. Our culture of building, growing and winning as a team is what makes this company special, and we are not willing to compromise on this front.
We 100% believe that this is the best long-term decision for Fanatics and our partners, and we look forward to growing the digital and transaction card business together under the Fanatics name. Collectibles with the incredible rights we have on NFL, MLB, NBA, NCAA, WWE, UFC, F1, UEFA, Disney and more.
Happy new year everyone,
Michael Rubin
Managing Director, Fanatics
