Sports merchandise firm Fanatics has announced that it will be divesting its majority 60% stake in nonfungible token (NFT) company Candy Digital, citing a lack of confidence in the asset class. The investor group led by Mike Novogratz’s Galaxy Digital will be purchasing the stake.
Fanatics, founded in 2011 and valued at $31 billion, has made a name for itself in sports merchandising and e-commerce. However, the recent bear market in the cryptocurrency industry has hit the NFT sector hard, leading Fanatics to turn away from standalone NFT businesses.
In an email to CNBC, Fanatics founder Michael Rubin explained the decision to sell the stake in Candy Digital, saying: “Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business.” Rubin went on to say that divesting ownership in Candy Digital “allowed us to ensure investors were able to recoup most of their investment via cash or additional shares in Fanatics,” adding that this was a favorable outcome “especially in an imploding NFT market that has seen precipitous drops in both transaction volumes and prices for standalone NFTs.”
Rubin believes that digital products will have more value when connected to physical collectibles, stating: “We believe digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors.”
Fanatics made headlines in January 2022 when it acquired Topps trading cards for roughly $500 million. It also acquired the rights to produce Major League Baseball trading cards and NFTs following Candy Digital’s launch last year.
Despite the struggles of the NFT market, Fanatics recently raised $700 million in fresh capital, which it plans to use on potential merger and acquisition opportunities across its collectibles, sports betting, and gaming businesses. Candy Digital, on the other hand, secured $100 million in funding in October 2021 at a valuation of $1.5 billion.
According to the Nonfungible.com market tracker, daily sales volumes in the NFT market have slumped from over 100,000 in January 2022 to around 15,000 today. Cointelegraph reached out to Fanatics and Candy Digital for comment, but had not received a reply at the time of publication.