Published on: September 25, 2024, 02:53h.
Updated on: September 25, 2024, 03:12h.
Fanatics is reportedly thinking about offering equity to its employees at a $25 billion valuation, which is lower than its previous valuation of $31 billion in December 2022.
According to sources cited by Bloomberg, Fanatics is considering selling $75 million to $100 million worth of shares to its employees to provide them with some liquidity. This move comes amid speculation that Chairman and CEO Michael Rubin may also sell a portion of his stake in the company.
While Fanatics has denied the rumors of Rubin selling his stake, the company is on track to achieve $8 billion in sales this year, representing a 15% increase from the previous year.
Reasons Behind the Equity Sale
Although Fanatics has not explicitly stated the reasons for offering equity to employees, the delay in its planned initial public offering (IPO) could be a contributing factor.
Rumors of an IPO by Fanatics Betting & Gaming’s parent company emerged in early 2022 when the valuation reached $27 billion. However, the company’s decision to remain private in 2022 and subsequent years has led to employee concerns regarding liquidity events.
Fanatics’ decision to remain private has also affected its ability to provide employees with an opportunity to monetize their equity, as most employees typically benefit from equity through an IPO.
Entities such as Major League Baseball (MLB), the NBA, NFL, and other major sports leagues have invested in Fanatics, further solidifying its position in the market.
Importance of Equity Sale for Fanatics Employees
Remaining private for a longer duration has become a trend among large privately held companies, including Fanatics, Plaid, and Stripe. The extended private status allows these companies to attain higher valuations before considering an IPO.
Employee equity monetization becomes challenging in a private company setting, as the most common method of achieving liquidity is through an IPO. However, there are alternative avenues available to employees seeking to sell their equity in a private company.
Secondary transactions for selling stock in a private company can be complex and costly. It may not yield the best price for the stock, as stated by Carta.