Quick take:
- Fanatics CEO Michael Rubin informed employees of the divestment in a memo today.
- The company sold off 60% of its majority stake in Candy Digital.
- Rubin said that NFTs “will most likely emerge as an integrated product/feature and not as a standalone business.”
Sports merchandise company, Fanatics, has sold its majority stake in NFT startup Candy Digital. This was revealed in a company memo sent by Fanatics CEO Michael Rubin today,
Rubin informed employees that Fanatics has sold off about 60% of its stake in Candy Digital to an unnamed group led by Galaxy Digital, the other shareholder of the sports and entertainment NFT startup.
Candy Digital was founded in 2021 by Michael Rubin, Galaxy Digital CEO Mike Novogratz, and entrepreneur Gary Vaynerchuk.
This move comes after Candy Digital laid off more than one-third of its 100-person team in November, joining several other Web3 companies in mass layoffs amidst the bear market exacerbated by the FTX fallout.
“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. He added that NFTs “will most likely emerge as an integrated product/feature and not as a standalone business.”
Despite raising $100 million at a $1.5 billion valuation in October 2021, Candy Digital is not spared from the NFT market slump. According to an NFT market report by Consensys, weekly sales for Arts & Collectibles continued to decline since Aug 21, 2022.
“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” Rubin wrote. He believes that “digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors.”
Rubin said that the divestment was made to “maintain the integrity of the relationships with our investors.” However, he also said that the company “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.”
According to data by “@thomas_m” on Dune Analytics, NFT trading volumes have declined 97% from January’s peak of $17 billion to $466 million in September last year.
In May last year, Candy Digital inked a multi-year agreement with Getty Images to release NFTs of images from Getty’s library and archive.
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