Fanatics raises $700 million, valuation crosses $31 billion

Fanatics Inc. raised around $700 million from a group of investors, pushing the sports-merchandising company's valuation to $31 billion, according to people familiar with the matter.

The people said that two-thirds of the new money came from parties that hadn't previously invested in the company, including private-equity firm Clearlake Capital Group LP, which led the round, and investment and merchant-banking firm LionTree LLC. Prior Fanatics investors, such as Silver Lake, Fidelity Management Research Co. and SoftBank Group Corp., were also among the participants.

The people said that the investment, which comes in the form of common stock, will be set aside for strategic M&A. They said the goal is to help Fanatics grow across its divisions, including its soon-to-be launched sports-betting and gaming business, and won't be used to fund its day-to- day operations.

Fanatics' latest valuation was a relatively modest step up from March, when it raised $1.5 billion at a $27 billion valuation. It stands out as one of the few instances in which a big company raised money at a higher valuation during the market turmoil of 2022.

The people said that the company expects to complete an initial public offering but plans to wait until the new-issue market reopens and some of its new business lines are more established.

Under Chief Executive Michael Rubin, Fanatics has tried to expand into areas beyond its core business of providing merchandise and memorabilia for professional sports teams. The people said that the business accounts for the bulk of the company's revenue, close to $6 billion in 2022 out of an expected total of nearly $7 billion.

Another division, Fanatics Collectibles, includes the trading-card business that the company launched last year, as well as a smaller one that offers sports-related nonfungible token, or NFTs. The unit is on track to post around $1 billion in sales this year, a figure that is expected to increase as more of its exclusive trading-card deals with players unions and leagues like the National Football League and the National Basketball Association kick in over the next few years, the people said.

In January, Fanatics said it was buying Topps Co., the dominant player in baseball cards. The purchase price was $500 million, according to The Wall Street Journal.

Rubin said that the third division of Fanatics -- its sports betting business - will launch in the spring of 2023 and will be in more than 15 states by the beginning of the next football season. Its launch would be the culmination of a months long effort by the company to enter the rapidly expanding market. Last year, Fanatics hired Matt King, the former CEO of FanDuel Group, to run the unit. In November 2021, it had an early setback when New York Gaming regulators rejected its application for a license.