Michael Rubin’s sports platform company Fanatics is divesting its 60% stake in NFT company Candy Digital, according to an internal email obtained by CNBC.
Fanatics, who previously held the majority share of Candy Digital, will be selling its interest to an investor group led by Galaxy Digital, the crypto merchant bank led by Mike Novogratz, which was the other original founding shareholder, according to the email.
Fanatics declined to comment.
Candy Digital was founded in June 2021 in the middle of the sports NFT boom, competing with companies like Dapper Labs in the digital sports collectible space. One of its first efforts came out of a multiyear licensing agreement with MLB to produce nonfungible tokens, which included an exclusive Lou Gehrig NFT. It also released digital collectibles with Netflix ‘s Stranger Things, WWE , and several Nascar teams.
However, akin to the broader NFT market, sports NFTs also saw a decline amid the ‘crypto winter’ that has seen the value of nearly all digital assets plummet. Dapper Labs, the company behind NBA Top Shot and NFL All Day digital trading platforms that ranked No. 9 on last year’s CNBC Disruptor 50 list, laid off 22% of its company in November.
Candy Digital had raised a $100 million Series A round in October 2021, valuing it at $1.5 billion at the time. Investors in that round included SoftBank’s Vision Fund 2, Insight Partners, and Pro Football Hall of Famer Peyton Manning, according to previous CNBC reporting.
It is unclear what Fanatics received for its stake in the company, but Rubin wrote “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 favorable outcome for investors, especially in an imploding NFT market that has seen precipitous drops in both transaction volumes and prices for standalone NFTs.”
Rubin cited several factors for Fanatics’ divesture in the email, which he wrote 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,” Rubin wrote. “Aside from physical collectibles (trading cards) driving 99% of the business, we believe digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors.”
In January 2022, Fanatics acquired Topps trading cards for roughly $500 million after also acquiring the rights to produce MLB trading cards, severing a nearly 70-year partnership between Topps and baseball’s top league.
Fanatics raised $700 million in fresh capital in December, aiming to use that new money to focus on potential merger and acquisition opportunities across its collectibles, betting and gaming businesses. It also pushed the company’s valuation to $31 billion.
The company, which started as an e-commerce platform selling team merchandise to sports fans, has looked to expand across 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 spoke of Fanatics’ growth plans, according to previous CNBC reporting.
Fanatics, a three-time CNBC Disruptor 50 company, was ranked No. 21 on last year’s list.
Here’s the full email Rubin sent to Fanatics staff on Wednesday:
Fanatics is divesting its 60% stake in NFT company Candy Digital
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