Fanatics is reportedly exploring the possibility of selling equity to its employees at a $25 billion valuation, significantly lower than its $31 billion valuation following a December 2022 funding round. According to unidentified sources cited by Bloomberg, the privately held sports apparel giant is considering offering $75 million to $100 million worth of shares to its staff, providing them with much-needed liquidity. A Fanatics representative noted that selling stock to employees would offer them financial flexibility, though no specific timeframe for a decision was disclosed.
This development comes roughly two months after speculation surfaced that Chairman and CEO Michael Rubin was contemplating selling $1 billion worth of his stake in the company. Fanatics has denied these rumors, and no such transaction has occurred. Founded in 1995, Fanatics is on track to achieve $8 billion in sales this year, marking a 15% increase from 2022.
While not officially stated by Fanatics, the delay in an initial public offering (IPO) could be influencing the decision to sell stock to employees. Rumors of an IPO for Fanatics Betting & Gaming’s parent company date back to early 2022 when it was valued at $27 billion. Initially, there was hope that the company would go public that year, but it became evident that 2022 was not the year for such a move. In 2023, anticipation continued to build, especially after the company held an investor day and appointed Deborah Crawford as senior vice president, head of investor relations. Crawford previously held a similar role at Facebook parent Meta Platforms. Yet, 2023 ended with Fanatics still privately held.
With just a few months left in 2024, it seems improbable that the company will go public this year. Fanatics boasts investment from all four major US sports leagues—Major League Baseball (MLB), the NBA, NFL, and NHL—as well as Major League Soccer (MLS). Other notable investors include Silver Lake, SoftBank, BlackRock, Fidelity, and MSD Partners, an investment entity led by Dell founder Michael Dell.
Fanatics’ position is not unique. Many large, closely held companies, often referred to as “unicorns,” are remaining private longer to secure larger valuations before going public. Alongside Fanatics, companies like Plaid and Stripe are part of this trend.
The decision to delay going public has its drawbacks for employees looking to monetize their equity, as an IPO is the most common route for such monetization. However, options exist for employees who wish to sell stock in a private company, such as secondary transactions. Although this method is feasible, it comes with complications, including a potentially lengthy process and costs that can reach up to 5% of gross proceeds, which may not always yield the best price for the stock, according to Carta.
While Fanatics continues to navigate these strategic decisions, the potential equity sale to employees underscores the company’s commitment to providing financial options for its workforce amid its extended period as a private entity.
