In the shrinking NFT market, the sports merchandise behemoth has lost its cool.
Fanatics is selling its stake in Candy Digital, a nonfungible token (NFT) company, as investor confidence in the asset class dwindles.
Michael Rubin’s sports company Fanatics was reported to be selling its majority 60% stake in the NFT startup on January 4.
Fanatics was founded in 2011 and has since grown to become a household name in sports merchandising and e-commerce, with a market capitalization of $31 billion.
However, the crypto bear market has taken a heavy toll on the NFT sector in 2022, and Rubin’s firm appears to be shifting away from “standalone” NFT businesses.
According to CNBC, an investor group led by Novogratz’s Galaxy Digital will buy a stake in Candy Digital. Rubin wrote in an email shared with the outlet:
“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business.”
He stated 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. ”
This was a good result for investors, “especially in an imploding NFT market that has seen precipitous drops in both transaction volumes and standalone NFT prices,” he added. According to Rubin, NFTs alone would not add much value.
“We believe digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors.”
In January 2022, Fanatics paid approximately $500 million for Topps trading cards. Following the launch of Candy Digital last year, it also acquired the rights to produce Major League Baseball trading cards and then NFTs.
In December 2022, Fanatics raised $700 million in new capital. According to CNBC, the funds will be used to pursue potential merger and acquisition opportunities in its collectibles, sports betting, and gaming businesses.
Candy Digital received $100 million in funding in October 2021, with a $1.5 billion valuation at the time.
However, during the 2022 crypto winter, the NFT markets shrank significantly. Daily sales volumes have fallen from over 100,000 in January 2022 to around 15,000 today, according to the Nonfungible.com market tracker.
Cointelegraph reached out to Fanatics and Candy Digital for comment but had not received a response at the time of publication.