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

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

Fanatics is said to be contemplating offering equity to its employees at a valuation of $25 billion, which is a significant decrease from the $31 billion valuation it received after a financing round in December 2022. 

According to unnamed sources close to the situation, Bloomberg reported on Wednesday that privately-owned Fanatics is considering selling shares worth $75 million to $100 million to employees of the sports apparel company. According to a representative from Fanatics speaking to Bloomberg, selling stock to employees would provide them with some liquidity. No mention was made of a timeline for a decision. 

The report came out about two months following speculation that Chairman and CEO Michael Rubin was thinking about selling $1 billion of his ownership in the firm. Fanatics refuted that speculation, and no such deal has come to fruition. Fanatics was established in 1995 and is projected to achieve $8 billion in sales this year, reflecting a 15% rise from 2023. 

Postponed IPO Might Be the Reason for Fanatics Equity Sale 

Although the company hasn't explicitly stated it as the reason for contemplating selling stock to employees, Fanatics' choice to stay private longer than anticipated by some market analysts may influence the employee tender. 

Speculations about a potential initial public offering (IPO) by the parent company of Fanatics Betting & Gaming have existed since at least the beginning of 2022, when the firm's valuation reached $27 billion. Before long, it was clear that 2022 would not be the year the company held an IPO. The next year, there was a buzz of optimism that an IPO was forthcoming, especially after the company conducted an investor day and appointed Deborah Crawford as senior vice president, in charge of investor relations. Crawford dedicated ten years to a comparable position at Facebook's parent company, Meta Platforms. 

Nevertheless, 2023 passed by while Fanatics stayed privately owned. With only a little more than three months left in 2024, it seems improbable that the company will launch its IPO this year. 

Fanatics includes the four primary US sports leagues — Major League Baseball (MLB), the NBA, NFL, and NHL — along with Major League Soccer (MLS) in its list of investors. Additional investors encompass Silver Lake, SoftBank, BlackRock, Fidelity, and MSD Partners, an investment entity overseen by Michael Dell, the founder of Dell. 

The Significance of an Equity Sale for Fanatics Employees 

Fanatics is not the only company choosing to stay private. Numerous significant privately-owned companies, referred to as "unicorns," are staying private longer to achieve higher valuations prior to going public. Along with Fanatics, Plaid, and Stripe, there are other members in that category. 

Choosing to remain private for an extended period can hinder employees' chances to cash in on their equity since the primary method for doing so is typically after an IPO, although there are options available for employees seeking to sell shares in a private firm. This includes a secondary transaction, although that choice has certain disadvantages. 

“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.