Report: Fanatics sheds stake in NFT firm Candy Digital
Decrypt report cites email in which CEO Michael Rubin brands emerging vertical non-profitable on standalone basis
Fanatics has reportedly divested its majority stake in NFT firm Candy Digital according to media reports on technology-based news site Decrypt.
The revelation comes from a leaked company memo concerning the sale, in which Fanatics global CEO Michael Rubin confirmed the 60% majority stake sale to Candy’s co-founding shareholder Galaxy Digital.
Candy Digital launched in June 2021 and quickly secured a $1.5bn valuation.
The memo comes amid a market slowdown in interest in NFTs, following wider drops in the cryptocurrency market, and the company’s performance which had led to a number of redundancies at Candy Digital in November.
Alluding to this in the memo, Rubin wrote: “When we looked at all the factors on the table, this was a rather straightforward and easy decision for us to make for several reasons.
“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” he added, citing Fanatics thinking that “digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors”.
In January 2021, Fanatics acquired US-based trading card firm Topps for $500m and has recently bought clothing retailer Mitchell & Ness, with the $250m deal partially funded by rapper Jay-Z.
Fanatics’ partners include all major US professional sports leagues (NFL, MLB, NBA, NHL, NASCAR, MLS, and PGA) and hundreds of collegiate and professional teams.
At an international level, the merchandiser has agreements with Manchester United, Chelsea, Paris Saint-Germain, Bayern Munich, Atletico Madrid, The FA, UEFA, NFL, NBA and Formula One.
Hinting at a shareholder-based motivation for the sale, Rubin continued, adding: “We never achieved full integration of Candy within the Fanatics environment or culture due to shareholders with competing objectives and goals.
“The investors in Candy bought into the vision not because of NFTs or Candy itself, but because of our track record at Fanatics.
“Divesting our ownership stake at this time allowed us to ensure investors were able to recoup most of their investment via cash or additional shares in Fanatics—a favourable outcome for investors, especially in an imploding NFT market that has seen precipitous drops in both transaction volumes and prices for standalone NFTs.”
Wider US sportsbook operators have been slow to adopt NFTs, with only DraftKings betting big on the vertical through its NFT marketplace and ReignMakers Football contests.