CEO Michael Rubin informed colleagues that Fanatics had sold its 60% stake in Candy Digital to a group of investors led by Galaxy Digital.
The sports merchandise giant Fanatics has divested its controlling share in NFT company Candy Digital. Today, Fanatics CEO Michael Rubin informed workers that the business has sold around 60% of its Candy Digital interest to a consortium led by Galaxy Digital, the other founding shareholder of the sports and entertainment-focused NFT startup. This action follows previous layoffs at the startup.
“When we looked at all the factors on the table, this was a rather straightforward and easy decision for us to make for several reasons,” Rubin wrote in the memo.
Candy Digital began in June 2021 with the official Major League Baseball license and raised $100 million in October 2021 with a valuation of $1.5 billion.
However, the NFT market collapsed significantly in 2022 due to larger crypto market declines, and Candy Digital, like many other NFT firms, was badly damaged. The November layoffs of at least one-third of Candy’s 100-person staff were initially reported by Sportico and verified by a company.
Rubin said that NFTs “will most likely emerge as an integrated product/feature and not as a standalone business.” Since co-founding Candy Digital in 2021, Fanatics has bought Topps, a legendary trading card brand with its own NFT business.
“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” Rubin wrote, adding that Fanatics believes that “digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors.”
This action was taken now, according to Rubin, to “maintain the integrity of the relationships with our investors,” and said that “we never achieved full integration of Candy within the Fanatics environment or culture due to shareholders with competing objectives and goals.”
“The investors in Candy bought into the vision not because of NFTs or Candy itself, but because of our track record at Fanatics,” he wrote. “Divesting our ownership stake at this time allowed us to ensure investors were able to recoup most of their investment via cash or additional shares in Fanatics—a favorable outcome for investors, especially in an imploding NFT market that has seen precipitous drops in both transaction volumes and prices for standalone NFTs.”
Rubin was one of the founders of the board, along with Mike Novogratz of Galaxy Digital and Gary Vaynerchuk, an entrepreneur and investor. Fans didn’t want to talk about this story.