Fanatics’ move to essentially take over the market for licensed sports trading cards is attracting investors and creating a new company worth significantly more than the current trio of licensees.
The Wall Street Journal reported Wednesday that the new entity, called Fanatics Trading Cards, had secured $350 million in Series A funding, pushing the company’s value to $10.4 billion before it produces even one product.
Fanatics jolted the sports card hobby last month when it reportedly secured deals with Major League Baseball, the NBA and NFL along with player unions to create a card company in which the leagues and players would also share in the revenue. The Journal reported Fanatics would still own 80 percent of the new company.
The new investors include private-equity firm Silver Lake, Endeavor Group Holdings Inc., which owns UFC, and Insight Partners, a private-equity and venture-capital firm based in New York.
Neither Fanatics nor the leagues involved have confirmed their new long-term trading card deals are in place and as of now, at least, both Panini America and Topps still own the licenses to produce cards for the near future. Fanatics’ deals with the leagues and players will reportedly be in place for 15-20 years once they are announced.
As we wrote earlier this month, Fanatics’ plans would almost have to stretch well beyond simply producing and selling cards. It’s believed they will look to streamline the collecting experience, offering collectors direct sales, a secondary market on which to sell and the ability to grade, break and store cards through them, among other possibilities. Just how it will all work and whether additional acquisitions of existing hobby businesses to facilitate it isn’t yet known and may not be for some time.
“With Fanatics owning the rights, they are fundamentally going to change the experience for the fan and collector in a way that the existing rights holders just haven’t done,” Greg Mondre, co-CEO of Silver Lake, told the Journal. “Hopefully, we’re going to expand the audience of people that access these cards, that trade these cards and want to collect these cards.”
The uptick in widespread interest in sports cards has had a major impact on prices and collectors’ ability to find the majority of boxes at retail prices over the last 24 months or so, a problem that led to aggressive behavior at traditional retail outlets like Target and Walmart, causing Target to pull most products from its shelves. Shopping bots and buyers looking to flip products for profit have also made buying cards online through those retail giants difficult, with products selling out within minutes of being listed for sale. Target wouldn’t respond to our recent request for an update on whether cards would return to store shelves. Fanatics’ control of sales and distribution of cards would be aimed at improving the current model and, thus, reaching a larger audience.
“We see a market that has the potential to be disrupted in a way that improves consumer choice, improves consumer experience and also expands the opportunity for the rights holders,” said Deven Parekh, a managing director at Insight Partners, told the Journal.
Josh Luber, the founder of StockX, is expected to play a key role at Fanatics, joining the company as a co-founder and “chief vision officer,” according to the Journal’s report.
The $10.4 billion valuation of Fanatics Trading Cards would place its value significantly higher than Panini, Topps and Upper Deck combined.
Fanatics’ move to acquire MLB’s trading card license scuttled Topps’ plans to merge with Mudrick Capital in a deal that would have valued the long-time card and confectioner at $1.3 billion.