Sports merchandise company Fanatics now valued at $18 billion with new investors including hip-hop mogul Jay Z

  • Fanatics raised $325 million to start a new company and will explore new revenue streams including sports gambling. Company chairman Michael Rubin will serve as CEO of the division.
  • Investors in the raise include music tycoon Jay Z and his entertainment company Roc Nation.

Sports merchandise company Fanatics secured a $325 million raise on Monday to start a new company within its parent umbrella. It's now valued at $18 billion, sources informed CNBC.

The Florida-based e-commerce firm will start a new company that will focus on revenue streams outside of merchandising. The division will be led by Fanatics chairman Michael Rubin, who will serve as chief executive officer. Fanatics claims it will make $3.4 billion in revenue this year, according to The Wall Street Journal.

Fanatics is seeking new opportunities like sports gambling and this move explains why it's been hiring new executives. Last month, Fanatics hired former IAC chief financial officer Glenn Schiffman to play a critical role in expanding into new sectors like gaming and new ticketing models. The company oversees a blockchain tied to their NFT company, Candy Digital. 

Former Los Angeles Dodgers president Tucker Kain joined the firm as chief strategy and growth officer. Matt King, Fan Duel's former CEO, is expected to help lead a sports gambling and gaming division.

It's still unclear the role Fanatics might play within the sports gambling sector. The company explored acquiring sports gambling provider PointsBet, but those discussions ended.

Investors in the raise include hip-hop mogul Jay Z and his entertainment company Roc Nation. SoftBank and Major League Baseball also have equity in Fanatics.

The investment continues an active 2021 for Jay Z. Last February, Moet Hennessy, the wine and spirits division of luxury conglomerate LVMH purchased a 50% stake in his champagne brand, Armand de Brignac. And last March, Jack Dorsey's Square platform purchased Jay Z's Tidal music service for $297 million in cash and stock.

Meanwhile, Rubin is transforming Fanatics into a more globally focused digital sports company that can serve various sectors within sports (merchandise, gambling, ticketing and the NFT marketplace). Fanatics plans to leverage its over 80 million user base tied to its merchandise division.

Fanatics enhanced its operations via acquisitions in 2020. The company also started operations in China to help increase its valuation from $6.2 billion in August 2020 to $12.8 billion last March.

Last December, Fanatics purchased sports manufacturer WinCraft to increase its presence with non-apparel merchandise. WinCraft sells home, office and automotive sports-themed merchandise, such as clocks and banners. The move accelerated its vertical commerce business and strengthened its manufacturing and distribution operations.

The National Football League and MLB benefit from any increased valuations since both leagues collectively invested $150 million in Fanatics in 2017. Last year, the $350 million raise resulted in a $100 million equity increase in their holdings in Fanatics.

And as Fanatics increases its stake throughout sports, it further fuels speculation an IPO is on the horizon. The company continues to downplay a potential entry into the public sector, though.

Asked about its plans on CNBC's "Squawk Box" last March, Rubin responded: "I think going public is an option for us that we talk about a lot but it's not something we're focused on today. We're focused on building a business. But I think we're well-financed and have a lot of growth capital to continue to grow."

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