The sports collectible company Fanatics is divesting its stake in the NFT firm Candy Digital, according to reports from CNBC on Jan. 4.
Candy Digital was founded in 2021 and has produced collections of NFTs for various sports leagues and groups including MLB, WWE, and NASCAR. It also branched out to produce crypto-collectibles for Netflix’s “Stranger Things” franchise in July 2021.
Until now, Fanatics acted as one of Candy Digital’s founding shareholders. It held a majority 60% stake in the company. Now, those shares will be sold to an investor group headed by Mike Novogratz’s crypto merchant bank, Galaxy Digital — which also acts as Candy Digital’s other founding shareholder.
None of the companies involved in the deal have publicly announced the sale. Rather, CNBC obtained its information from an internal email.
Fanatics founder and executive chairman Michael Rubin wrote in that email:
Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business…we believe digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors.
In the same email, Rubin referred to an “imploding NFT market” that has seen a decline in transaction volume and item prices. He suggested that divesting stake in Candy Digital at this point will provide a “favorable outcome for investors.”
Rubin added that traditional physical trading cards drive 99% of the sports collectibles business. Fanatics owns various non-crypto collectible companies, including the trading card company Topps, the jersey firm Mitchell and Ness, and the signed memorabilia company Steiner Sports. Those companies, along with Fanatics’ other subsidiaries and main business, presumably drive the majority of the company’s revenue.
The value of the NFT market has indeed declined significantly since its 2021 boom. However, despite Fanatics’ pessimistic outlook on the NFT market, recent estimates suggest that the value of the NFT market is still 11x larger than it was two years ago — leaving open the possibility of long-term growth.