Fanatics exits Candy Digital investment amid NFT market uncertainty
According to an internal email revealed by CNBC, sports platform Fanatics is supposedly selling its 60% investment in NFT firm Candy Digital. Per the email, Mike Novogratz’s cryptocurrency merchant bank Galaxy Digital, the other original founding stakeholder of Candy Digital, will lead a group of investors in purchasing the majority share from the company. Since Fanatics had previously owned the bulk of the company’s shares, this decision surprised many in the business.
The NFT market has not been favourable for the digital sports space
Candy Digital, a sports NFT startup, has struggled amid the fluctuating NFT market despite several partnerships and a $100 million Series A financing in October 2021.
Candy Digital has worked with other companies in the sector, such as the maker of NBA Top Shot (Dapper Labs) and NFL All Day, despite receiving financing and forming partnerships with significant players like MLB, Netflix’s Stranger Things, WWE, and Nascar.
With a valuation of $1.5 billion at the time of its Series A round, which included investors like SoftBank’s Vision Fund 2, Insight Partners, and football great Peyton Manning, Candy Digital maintains its optimism despite the roadblocks.
Uncertainties as to why Fanatics have decided to withdraw their investments
Fanatics’ stake in the business was sold for an undisclosed sum. However, according to Rubin, divesting their ownership stake at this time allowed them to focus on ensuring investors could recover most of their investment via funds or additional shares in Fanatics – a good result for investors, particularly in a collapsing NFT market that has seen sudden and dramatic drops in both trading volumes and prices for standalone NFTs.
In the email, Rubin listed several factors that led to Fanatics’ divestment, noting that it was “a fairly basic and easy choice for us to make for several reasons.”
NFTs are likely to fail to be successful or viable as stand-alone firms, according to Rubin. This has been obvious during the past year. In addition to actual collectibles (trading cards), which account for 99% of sales, he stated that virtual goods would be more valuable and practical when combined with physical collectibles to provide collectors with the greatest possible experience.
Fanatics has been a big player in the sports sector
Sports merchandise company Fanatics has made significant moves in the collectibles industry, including acquiring Topps trading cards for $500 million and the rights to produce MLB trading cards. These actions, along with the recent $700 million in fresh capital and the company’s $31 billion valuation, have solidified Fanatics’ position as a significant player in the sports ecosystem. In addition, there are rumors of an upcoming initial public offering, and CEO Michael Rubin recently met with analysts from various Wall Street firms to discuss the company’s growth plans.
