Fanatics is said to be thinking about offering equity to employees at a valuation of $25 billion, which is a significant reduction from the $31 billion the company was worth after a funding round in December 2022. 

Bloomberg reported Wednesday, citing unnamed sources knowledgeable about the situation, that the privately held Fanatics is considering selling shares valued between $75 million and $100 million to employees of the sports apparel company. A representative from Fanatics informed Bloomberg that offering stock to employees would provide them with some liquidity. The timing for making a decision was not specified. 

The news came to light around two months following speculation that Chairman and CEO Michael Rubin was thinking about selling $1 billion of his shares in the company. Fanatics rejected that speculation, and no such deal has occurred. Founded in 1995, Fanatics 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 has not explicitly stated that it is the reason for contemplating the employee stock sale, Fanatics' choice to stay private longer than some analysts anticipated may play a role in the employee tender. 

Speculations about a potential initial public offering (IPO) by the parent company of Fanatics Betting & Gaming have existed since at least early 2022, when the firm's valuation reached $27 billion. Shortly after, it became clear that 2022 would not be the year for the company to go public. The next year, hope 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 staying privately owned. With just over three months left in 2024, it seems improbable that the company will launch its public offering this year. 

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

The Significance of an Equity Sale for Fanatics Employees 

Fanatics isn't the only one choosing to stay private. Numerous sizable privately held companies, referred to as “unicorns,” are staying private for an extended period to achieve higher valuations before they go public. Along with Fanatics, Plaid, and Stripe, other companies are included in that category. 

Opting to remain private for an extended period can restrict employees from cashing in on their equity, as the usual method for doing so occurs after an IPO; however, there are options available for staff wanting to sell shares in a private firm. This encompasses 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.