Fanatics Mulling Equity Sale to Staffers at Discounted $25B Valuation
Fanatics is said to be contemplating offering equity to its employees at a $25 billion valuation, significantly lower than the $31 billion valuation the company received after a funding round in December 2022.
Bloomberg reported on Wednesday, citing anonymous sources knowledgeable about the situation, that the privately-owned Fanatics is considering selling shares valued between $75 million and $100 million to its employees at the sports apparel company. A Fanatics representative informed Bloomberg that selling stock to employees would provide them with some liquidity. No timeframe for a decision was specified.
The announcement came around two months after speculation arose that Chairman and CEO Michael Rubin was thinking about selling $1 billion of his shares in the company. Fanatics refuted that speculation, and no such deal has occurred. Established in 1995, Fanatics is projected to achieve $8 billion in sales this year, marking a 15% rise from 2023.
Postponed IPO May Be the Reason for Fanatics Equity Sale
While the company hasn’t explicitly stated that the sale of stock to employees is influenced by this, Fanatics’ choice to stay private for a longer time than anticipated by some market analysts might play a role in the employee tender.
Speculation about a potential IPO from the parent company of Fanatics Betting & Gaming has been circulating since at least early 2022, when the firm was valued at $27 billion. Shortly after, it became clear that 2022 would not be the year the company went public. The next year, optimism circulated that an IPO was imminent, 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 Meta Platforms, the parent company of Facebook.
Nonetheless, 2023 passed by with Fanatics still being privately owned. With slightly more than three months left in 2024, it seems improbable that the company will become public this year.
Fanatics includes the four primary US sports leagues—Major League Baseball (MLB), the NBA, NFL, and the NHL—as well as Major League Soccer (MLS) in its group of investors. Additional investors consist of Silver Lake, SoftBank, BlackRock, Fidelity, and MSD Partners, an investment entity managed by Dell's founder, Michael Dell.
The Importance of an Equity Sale to Fanatics Employees
Fanatics is not the only one choosing to stay private. Numerous substantial privately owned companies, referred to as “unicorns,” are staying private for extended periods to achieve higher valuations prior to going public. Along with Fanatics, Plaid, and Stripe, others are included in that category.
Choosing to remain private for an extended period can hinder employees from cashing in on their equity, as the usual method for doing so occurs after an IPO; however, there are options available for employees wishing to sell shares in a private firm. This encompasses a secondary transaction, although that choice comes with certain limitations.
“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.
