Fanatics, the top sports merchandise brand, is divesting its 60% stake in its nonfungible token (NFT) company – Candy Digital.
It has been reported that the decision comes through owing to the downturn of the industry in the bear market. The Michael Rubin led company held the majority stake on the sports NFT platform. Candy Digital is now being sold to Mike Novogratz’s Galaxy Digital investor group.
However, earlier this week, Michael Rubin sent out an e-mail statement announcing Fanatics’ departure from Candy Digital. The email did not specify a specific valuation of the sale. The email does imply a number lower than their original valuation of $1.5 billion. In late 2022, amid the ongoing crypto winter, the demand for sports NFTs fell drastically low.
The report said that for comparison, in February 2021, the monthly sports NFT sales highs hit ~$225 million, but the latest bear market sees this number fall to around $2.2 million as of December 2022.
In the email, Rubin wrote:
“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business. 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.”
Likewise, the Fanatics brand is aiming to restructure their digital model to become a top commerce platform for global sports fans. The company received $700 million in fresh capital during December to use for expanding its collectibles, betting and gaming businesses. However, the NFT markets have drastically shrunk during the long crypto bear. The market went from over 100,000 sales in January 2022 to around 15,000 today, according to an NFT market report.
The company is now aiming to expand over sports betting and trading cards. Moreover, they also aim to integrate better “phygital” experiences to tie in to their brand value. The email has also mentioned that the sell-off allows Fanatics investors to recoup most of their investments. This is via cash or additional shares in Fanatics.
Additionally, it mentions reasons for why the company was not a great fit in their ecosystem.
Thus, it stated:
“Unfortunately, we never achieved full integration of Candy within the Fanatics environment or culture due to shareholders with competing objectives and goals.”
Source: NFT Evening