Fanatic sells 60% stake in Candy Digital amid ‘imploding NFT market’

Sporting goods firm Fanatics is divesting its stake in nonfungible token (NFT) company Candy Digital as confidence in the asset class wanes.

On January 4, it was reported that Michael Rubin’s sports company Fanatics offloaded its 60% majority stake in the NFT startup.

Founded in 2011, Fanatics has become a household name in sports merchandising and e-commerce, valued at $31 billion.

However, the crypto bear market has hit the NFT sector hard in 2022, and Rubin’s firm now appears to be turning away from “standalone” NFT businesses.

The investor group led by Novogratz Galaxy Digital will buy the stake in Candy Digital, according to CNBC. In an email shared with the outlet, Rubin wrote:

“Over the past year it has become clear that NFTs are unlikely to be sustainable or profitable as a stand-alone business.”

He stated that the divestment of ownership in Candy Digital “allowed us to ensure that investors were able to recoup most of their investment via cash or additional shares of Fanatics.”

This was a favorable outcome for investors “especially in an imploding NFT market that has seen sharp declines in both transaction volume and prices for standalone NFTs,” he added. NFTs alone would not create much value, according to Rubin, who said:

“We believe digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors.”

Fanatics purchased Topps trading cards for approximately $500 million in January 2022. Furthermore, they purchased the rights to produce Major League Baseball trading cards and then NFTs after the launch of Candy Digital last year.

Related: What remains in the NFT market now that the dust has settled?

Fanatics raised $700 million in new capital in December 2022. The funding will be used for potential merger and acquisition opportunities across collectibles, sports betting and gaming businesses, according to CNBC.

Candy Digital secured $100 million in funding in October 2021 at a valuation of $1.5 billion at the time.

However, the NFT markets have shrunk considerably during the 2022 crypto winter. According to the Nonfungible.com market tracker, daily sales volumes have dropped from over 100,000 sales in January 2022 to around 15,000 today.

Cointelegraph reached out to Fanatics and Candy Digital for comment, but had not received a response at the time of publication.