Fanatics, a top sports merchandise brand, announced on January 5 that it is divesting its 60% stake in its nonfungible token (NFT) firm – Candy Digital. This radical decision comes through owing to the downturn of the sector in the bear market.
The Michael Rubin-led firm held the most stake in the sports NFT platform. Candy Digital is now being sold to Mike Novogratz’s Galaxy Digital investor group. Why is the shift of hands happening?
Why Is Fanatics Selling Its Candy Digital Stake?
The leading sports merchandiser Fanatics said that it is selling its 60% majority stake in Candy Digital to Galaxy Digital. Galaxy Digital is a crypto merchant bank that is led by Mike Novogratz. Coincidentally, Mike Novogratz is also one of the co-founding members of Candy Digital, together with NFT founder and thought leader Gary Vee.
Candy Digital was launched during the bull market of 2021. It became one of the major players for sports NFTs in the market. The firm has introduced digital collectibles ranging from projects around Netflix’s Stranger Things, MLB (Major League Baseball), WWE, and NASCAR teams.
Earlier in the week, Michael Rubin sent out an email statement confirming Fanatics’ departure from Candy Digital. But, the email never specified a particular valuation of the sale. Nonetheless, the email does imply a number lower than their original valuation of $1.5 billion.
In late 2022, amid the continuing crypto winter, the demand for sports NFTs dropped drastically. For comparison, in February 2021, the monthly sports NFT sales highs reached $225 million, but the latest bear market pushed the number extensively low to about $2.2 million in December 2022.
“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” wrote Rubin in the email. “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.”
How Fanatics Hope To Expand In Web3
The Fanatics brand is hoping to restructure its digital model to become a top commerce platform for global sports fans. The firm got $700 million in fresh capital in December to use for expanding its collectibles, betting, and gaming businesses.
Nevertheless, the NFT markets have steeply shrunk during the long and persistent crypto bear market. The market went from more than 100,000 sales in January 2022 to about 15,000 currently, based on a NonFungible market report.
The firm is now aiming to expand over sports betting and trading cards. Furthermore, they also want to integrate better “phygital” experiences to incorporate into their brand value. The email has also mentioned that the sell-off lets Fanatics investors recoup most of their investments. This is through cash and additional shares in Fanatics. Moreover, it highlights reasons why the firm was not a great match for their ecosystem. It said:
“Unfortunately, we never achieved full integration of Candy within the Fanatics environment or culture due to shareholders with competing objectives and goals.”
There are no more comments or statements from either of these brands on the trade-off. Crypto winters as everyone knows are brutal as they come. However, building for the far future appears to be the best strategy during these times.
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