Sporting goods company Fanatics is divesting its stake in non-fungible token company Candy Digital (NFT) as confidence in the asset class wanes.
On January 4, it was reported that Michael Rubin’s esports company Fanatics was offloading its 60% stake in the NFT startup.
Fanatics was founded in 2011 and has become a well-known name in sports commerce and e-commerce, valued at $31 billion.
MLB ICON Leadoff NFT Collectibles, launched by Candy Digital in April. Source: MLB
However, the cryptocurrency bear market has hit the NFT sector hard in 2022, and it appears that Rubin’s company is now looking to move away from the “independent” NFT business.
The group of investors led by Mike Novogratz’s Galaxy Digital will buy the stake in Candy Digital, according to CNBC. In an email shared with the outlet, Rubin wrote:
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“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business.”
He stated that the divestiture in Candy Digital “has allowed us to ensure that investors can recoup most of their investment with cash or additional shares in fanatics.”
He added that this was a positive outcome for investors “particularly in the crashing NFT market which has seen both transaction volume and prices of stand-alone NFTs drop sharply.” According to Rubin, NFTs alone will not create much value, as he said:
“We believe that digital products will have greater value and usefulness when connected to physical collectibles to create the best experience for collectors.”
Fanatics acquired Topps trading cards for about $500 million in January 2022. It also acquired the rights to produce Major League Baseball trading cards and then NFT cards after launching Candy Digital last year.
Related: What’s Left in the NFT Market Now That the Dust Has Settled?
The Fanatics raised $700 million in new capital in December. The funding will be used for potential merger and acquisition opportunities across its holdings and sports betting and games business, according to CNBC.
Candy Digital secured $100 million in financing in October 2021 at a value of $1.5 billion.
However, NFT markets shrank significantly during the winter of 2022. According to market tracker Nonfungible.com, daily sales volumes have plummeted from over 100,000 sales in January 2022 to around 15,000 today.
Cointelegraph reached out for comment from the fanatics and Candy Digital but did not receive a response at the time of publication.