Fanatics Mulling Equity Sale to Staffers at Discounted $25B Valuation

Posted on: September 25, 2024, 02:53h. 

Last updated on: September 25, 2024, 03:12h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Fanatics is reportedly considering selling equity to employees at a $25 billion valuation, a hefty discount to the $31 billion the company was valued at following a December 2022 funding round.

Fanatics
The Fanatics Sportsbook logo. The company is rumored to be considering the sale of equity to employees at a $25 billion valuation. (Image: Fanatics)

Citing unidentified sources familiar with the matter, Bloomberg reported Wednesday that privately held Fanatics is mulling selling $75 million to $100 million worth of shares to staffers of the sports apparel giant. Selling stock to employees would give them some liquidity, a Fanatics representative told Bloomberg. Timing for a decision wasn’t mentioned.

The news emerged about two months after rumors surfaced that Chairman and CEO Michael Rubin was considering selling $1 billion worth of his stake in the company. Fanatics denied that speculation and no such transaction has materialized. Fanatics was founded in 1995 and is expected to post $8 billion in sales this year, a 15% increase from 2023.

Delayed IPO Could Be Behind Fanatics Equity Sale

Though not directly mentioned by the company as the impetus for considering the sale of stock to employees, Fanatics’ decision to remain private longer than some market observers expected could be a factor in the employee tender.

Rumors regarding an initial public offering (IPO) by the parent of Fanatics Betting & Gaming date back to at least early 2022 when the company was valued at $27 billion. Soon thereafter, it became apparent that 2022 wouldn’t be the year in which the company went public. The following year, optimism swirled that an IPO was near, particularly after the company held an investor day and hired Deborah Crawford as senior vice president, head of investor relations. Crawford spent a decade in a similar role at Facebook parent Meta Platforms.

However, 2023 came and went with Fanatics remaining closely held. Now with just over three months remaining in 2024, it appears unlikely the company will go public this year.

Fanatics counts the four major US sports leagues — Major League Baseball (MLB), the NBA, NFL, and the NHL — as well as Major League Soccer (MLS) among its investors. Other investors include Silver Lake, SoftBank, BlackRock, Fidelity, and MSD Partners, an investment vehicle controlled by Dell founder Michael Dell.

Why an Equity Sale is Important to Fanatics Staffers

Fanatics isn’t alone in opting to remain private. Many large closely held firms, also dubbed “unicorns,” are remaining private for longer in an effort to command larger valuations before going public. In addition to Fanatics, Plaid, and Stripe, among others are part of that group.

The decision to stay private for longer can hamper employees’ ability to monetize their equity because the most common avenue through which that happens is following an IPO, but there are avenues for workers looking to sell stock in a private company. Those include a secondary transaction, though that option has some drawbacks.

“A secondary transaction that’s not facilitated by the company is a complex process that takes a lot of time. It can also cost upwards of 5% of your gross proceeds, and may not get you the best price for your stock,” according to Carta.