Fanatics, who had majority ownership of Candy Digital, will be divesting their shares to an investor group headed by Galaxy Digital, a cryptocurrency merchant bank run by Mike Novogratz.
Sports merchandise company Fanatics is selling its stake in non-fungible token company Candy Digital due to waning confidence in NFTs.
Michael Rubin’s sports company Fanatics announced on Jan. 4 that it was offloading 60% of its stake in the NFT startup company.
Founded in 2011, Fanatics is a well-known name in sports merchandising and e-commerce, valued at $31 billion.
Rubin’s company seems to be turning away from “standalone” NFT businesses due to the crypto bear market hitting the NFT sector hard in 2022.
CNBC reports that Galaxy Digital will purchase Candy Digital’s stake from the investor group led by Mike Novogratz. This is what Rubin wrote in an email to the outlet:
“It has become clear over the past year that NFTs are unlikely to be sustainable or profitable as a standalone business.“
As a result of divesting Candy Digital, he said, investors were able to recoup most of their investment through cash or additional shares of Fanatics.
He added that this was a favorable outcome for investors, particularly in an imploding NFT market that has seen precipitous drops in both transaction volumes and prices. In Rubin’s view, NFTs alone would not provide much value.
“The best way to provide collectors with the best experience is to combine digital products with physical collectibles.”
Approximately $500 million was spent by Fanatics in January 2022 on Topps trading cards. After Candy Digital’s launch last year, the company acquired the right to produce Major League Baseball trading cards and NFTs.
In December, Fanatics raised $700 million in fresh capital. The company will use the funding to pursue merger and acquisition opportunities in its collectibles, sports betting, and gaming businesses.
$100 million was raised by Candy Digital in October 2021 for a valuation of $1.5 billion.
The NFT markets have, however, shrunk significantly during the 2022 crypto winter. A market tracker at Nonfungible.com reports that daily sales volumes have dropped from over 100,000 in January 2022 to about 15,000 today.
Starting as an e-commerce platform that sells team merchandise to sports fans, the company is looking to expand across the entire sports ecosystem. Additionally, Fanatics is thinking about an initial public offering. Rubin recently met with more than 90 Wall Street analysts to discuss the company’s plans for growth.