Fanatics IPO Could Be Near Following Conclusion of Another Investor Day

Posted on: June 16, 2023, 01:20h. 

Last updated on: June 19, 2023, 12:38h.

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

Earlier this week, Fanatics wrapped up a second investor day, stoking speculation that the apparel giant and new sportsbook operator could be readying an initial public offering (IPO).

Fanatics IPO
Fanatics founder Michael Rubin, seen here in a 2019 CNBC interview. The company could be readying an IPO for the second half of 2023. (Image: CNBC)

Michael Rubin’s Florida-based company reportedly held an investor meeting at the NBA Players Association’s (NBPA) New York headquarters on Tuesday. An unidentified source with knowledge of the matter told CNBC that the event was attended by 100 institutional investors and representatives from investment banks vying to book the IPO. Another 300 people participated in the meeting over Zoom.

Leaders from Fanatics’ primary businesses, apparel, collectibles, and Fanatics Betting & Gaming (FBG)  were on hand to give presentations and answer questions from prospective investors. Following a December 2022 $700 million capital raise, Fanatics is valued at $31 billion. Should the company raise close to that amount or more, it would be one of this year’s biggest IPOs.

Attendees at the Fanatics investor day were reported wooed by seven-time Super Bowl champion Tom Brady, who’s an early investor in the company. Brady is also a minority owner of the Las Vegas Raiders, and one of the companies in which he’s an investor does business with Fanatics rival DraftKings (NASDAQ: DKNG).

Reinvigorated IPO Market Could Pave Way

As of June 16, there have been 72 IPOs this year on US exchanges, a 41% drop from the same period last year. Companies with ties to the gaming industry have been quiet on the IPO front.

Some IPO market observers believe the success earlier this week of Mediterranean restaurant chain Cava Group’s (NYSE: CAVA) IPO could open the door to more consumer discretionary offerings in the back half of 2023. The restaurant operator raised $318 million and its shares more than doubled on Wednesday, the stock’s first trading day. Obviously, Cava and Fanatics isn’t an apples-to-apples comparison. But improving IPO sentiment could compel the latter to go public this year.

To its credit, Fanatics hasn’t rushed the IPO process, and has been consistent in targeting a potential share sale at some point in 2023 after resisting a similar transaction last year. That could prove prescient, because the environment for large-cap growth stocks has improved markedly from 2022.

Fanatics could benefit by modestly accelerating its IPO plans, because the bulk of this year’s most anticipated offerings, including those by Chime Financial, Instacart, Reddit, and Stripe, haven’t priced as of yet.

IPO Could Provide Valuable Fanatics Insight

As a closely held company, Fanatics isn’t legally required to open its financial doors to a broad swath of the investing public. That will change if the firm proceeds with an IPO.

With the added insight, analysts and investors will get a more accurate sense of how to value Fanatics and its three primary businesses. Should an IPO materialize at some point this year, it’s reasonable to expect that apparel and collectibles will be the dominant sources of the company’s revenue, and gaming will be viewed as a bit, but potential-laden contributor to the firm’s long-term growth trajectory.

Should Fanatics go public, market participants would also have a better handle on the corporation’s finances and its ability to leverage capital to acquire sports wagering market share.