Fanatics offload holdings in Candy Digital to Galaxy Digital
Posted on: 4 January 2023, 06:06h.
Last updated: 4 January 2023, at 06:06.
Fanatics is divesting its 60% stake in non-fungible token (NFT) platform Candy Digital as prices of digital collectibles fall.
The sportswear giant, which is fast approaching its entry into the US online sports gaming market, is selling its stake in Candy Digital to Galaxy Digital for an undisclosed sum. Galaxy is a crypto banking entity controlled by Mike Novogratz and was the original co-investor in Candy Digital along with Fanatics.
By selling our stake at this time, we were able to ensure that investors were able to recoup most of their investment via cash or additional shares of Fanatics – a favorable outcome for investors, especially in an imploding NFT market that has seen strong decline in both transaction volumes and prices for standalone NFTs,” Fanatics founder Michael Rubin wrote in an email to employees.
Candy Digital was born in July 2021 just as the market for digital collectibles was booming and cryptocurrencies – a key element in the NFT arena – were soaring. Around that time, platforms like NBA Top Shot were hailed. In October 2021, Candy Digital raised $150 million in venture funding at a $1.5 billion valuation. In early 2022, however, enthusiasm for digital collectibles, sports and more, waned, leading to a massive drop in prices.
Fanatics maintain traditional collectibles
NFT is a growing digital asset class, and while it is possible that enthusiasm for digital collectibles and prices will eventually pick up, many collectors still prefer something they can physically hold, store or hang on their walls.
On that front, Fanatics is well positioned because the Florida-based company is exactly one year away from announcing its $500 million acquisition of Topps Sports & Entertainment. It was a sensible deal because in August 2021 the buyer announced card deals with Major League Baseball (MLB) – for years fertile territory for Topps – and the NBA, as well as deals with the players in those leagues and the NFL Players Association (NFLPA).
“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” Rubin added in the email to employees. “Apart from physical collectibles (trading cards) that drive 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.”
Some companies that Fanatics will soon collide with have NFT platforms. DraftKings Marketplace debuted in 2021, partnering with Autograph, an NFT fundraising platform founded by Tampa Bay Buccaneers quarterback and seven-time Super Bowl champion Tom Brady.
Fanatics Sports Betting Debut Imminent
Rubin did not mention to employees that the proceeds from the sale of Fanatics’ 60% Candy Digital stake were directed to the company’s sports gaming efforts, but it is a possibility.
Earlier today, the company told the Massachusetts Gaming Commission (MGC) that it plans to launch an online sportsbook this quarter.
This endeavor is likely to involve multiple states and will be costly as Fanatics enters direct competition with DraftKings and FanDuel, among others.
