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, which previously owned a majority stake in Candy Digital, will sell its interest to an investor group led by Galaxy Digital, a crypto merchant bank led by Mike Novogratz, who was the other original founding shareholder.
The hardliners declined to comment.
candy was digital Established in June 2021 In the midst of the sports NFT boom, competing with companies like Dapper Labs in the digital sports collectibles space. One of its first efforts stemmed from a multi-year licensing agreement with MLB to produce non-convertible tokens, which included a special Lou Gehrig NFT. It also released digital collectibles netflixstrange things, WWEand several Nascar teams.
However, similar to the wider NFT market, sports NFTs have also seen a decline amid the ‘crypto winter’ which has seen almost all digital assets drop in value. Dapper Labs, the company behind the NBA Top Shot and NFL All Day digital trading platforms number 9 In last year’s CNBC Disruptor 50 list, laid off 22% of his company in November,
Candy Digital raised a $100 million Series A round in October 2021, valuing it at $1.5 billion at the time. investors at that time softbankK Vision Fund 2, Insight Partners, and Pro Football Hall of Famer Peyton Manning, Per previous CNBC reporting,
It is not clear what Fanatics received for their stake in the company, but Rubin wrote “diversifying our ownership stake at this time allowed us to ensure that investors would receive the majority of their investment in cash or additional shares in Fanatics.” were able to recover via NFTs – a favorable outcome for investors, especially in an exploding NFT market that has seen both transaction volumes and prices for standalone NFTs drop sharply.”
Rubin cited several factors in the email for the Radicals divestment, which he wrote was “a straightforward and easy decision for us for a number of reasons.”
“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” Rubin wrote. “With physical collectibles (trading cards) driving 99% of the business, we believe digital products will have greater value and utility when connected to physical collectibles to create the best experience for collectors.”
In January 2022, Radical Acquired Topps Trading Cards for approximately $500 million MLB broke the nearly 70-year partnership between Topps and baseball’s top league after it acquired the rights to make trading cards.
picked up by fanatics $700 million in fresh capital in December, aiming to use that new money to focus on potential merger and acquisition opportunities in its collecting, betting and gaming businesses. It also pushed the company’s valuation to $31 billion.
What started as an e-commerce platform selling team merchandise to sports fans has sought to expand into the entire sports ecosystem. The company is also weighing 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 Fanatic’s growth plans, according to previous CNBC reporting. Of.
Radical, a three-time CNBC Disruptor 50 company 21st place Last year’s list.
Here’s the full email Rubin sent to Radicals employees on Wednesday:
Team Fanatics –
Happy New Year. I hope everyone got a chance to recharge and have a great time with family and friends during the holidays, and your 2023 is off to a great start.
As we are getting back into the swing of things, I wanted to share some news with you all. Effective immediately, Fanatics has sold approximately 60% of our stake in Candy Digital. We have sold our interest in the NFT Company to an investor group led by Galaxy Digital, the other original founding shareholder. When we looked at all the factors on the table, it was a fairly straight forward and easy decision for us for several reasons.
Business Model – NFTs are most likely to emerge as an integrated product/feature and not a standalone business: Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business. With physical collectibles (trading cards) driving 99% of the business, we believe digital products will have greater value and utility when linked to physical collectibles to create the best experience for collectors. To that end, we already have a broader and more significant set of NFT and digital collectibles rights within our Fanatics Collectibles business, which came with our trading card rights (NFL, MLB, NBA and more), which we Integrating seamlessly with the world – we currently have virtual physical collectible rights. Ultimately, our goal is to increase the number of game collectors. Connectivity between physical and digital collectibles will be the most powerful way for NFTs and their collectors to create emotional resonance and lasting success.
Investor Relations: Taking this immediate action not only makes sense for Radical’s strategic direction, but also allows us to preserve the integrity of the relationship with our investors. Investors in Candy bought into Vision not because of the NFTs or the Candy itself, but because of our track record of fundamentalists. This proven track record is the result of your hard work and our alignment on a mission to build the leading global digital sports platform. Therefore, it was imperative for us to protect their investment due to changes in the market and financial environment. Diluting our ownership stake at this time allowed us to ensure that investors were able to recoup most of their investment in cash or through additional shares in radicals – a favorable outcome for investors, especially a In the NFT market, which has seen a sharp decline in both transaction volume and Prices for standalone NFTs.
Cultural Integration: Similar to how fast we move when the right strategic acquisition or partnership comes along, we move 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 only works when we can leverage the collective intelligence and expertise of all our teams and associates. Unfortunately, we never achieved full integration of Candy within the fanatics’ environment or culture due to shareholders having competing objectives and goals. What makes this company special is our culture of building, growing and winning as a team, and we weren’t willing to compromise on that front.
We are 100% confident that this was the best long-term decision for Fanatics and our partners and we look forward to growing our digital and trading card business together under Fanatics Collectibles with our incredible rights to the NFL, MLB, NBA, NCAA Huh. , WWE, UFC, F1, UEFA, Disney and more.
Happy new year to all of you,
Michael Rubin
CEO, Fanatics