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Pre-IPO pedia | Valuation at $27 billion, how the sports e-commerce empire of Fanatics is built

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Moomoo IPO Buzz wrote a column · Jul 14, 2022 21:51
Pre-IPO pedia | Valuation at $27 billion, how the sports e-commerce empire of Fanatics is built
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The buying spree of the 2022 Beijing Winter Olympics mascot "Bing Dwen Dwen" has shown the great potential of the licensed sports merchandise market to some extent.
According to securities firms, revenues from licensed sports merchandise during the Beijing Winter Olympics will exceed RMB 2.5 billion.
Also, according to the market research firm Fact. MR, the global licensed sports merchandise market will be worth about $30 billion in 2020 and is expected to exceed $59 billion by 2031, representing a CAGR (compound annual growth rate) of 7%.
Source: Fanatics official website
Source: Fanatics official website
Fanatics is one of the frontrunners in this popular track. With billions of dollars in annual e-commerce sales, Fanatics is ranked 36th out of 1,000 in the 2021 North American e-commerce rankings of the U.S. Chamber of Digital Commerce.
As the world's largest sports e-commerce platform, nowadays Fanatics has built partnerships with all major sporting IPs.
However, Fanatics has never stopped expanding its business empire. In 2021 alone, the company has made three expansions that have caught the attention of the capital market.
How has Fanatics built its sports e-commerce empire step by step? IPO Buzz will take you to its story.
Foundation
In 1995, Fanatics was set up in Florida, USA. The two founders opened a small local shop to sell equipment and peripheral products for the local rugby team since both of them are big fans of rugby.
In 1997, they began to transfer their offline business to online sales, hoping to expand their business and make their favorite sports merchandise available to global fans.
Riding on the booming Internet, Fanatics quickly grew in size and expanded its business.
By the time of its acquisition, Fanatics had been operating over 250 e-commerce sites,including the online shops of numerous university sports teams, some professional sports teams and media brands.
Also in the 1990s, the current CEO of Fanatics, Michael G. Rubin, founded Global Sports Incorporated, an online outdoor company that formally acquired Fanatics in 2011.
Michael G. Rubin (Source: Fanatics official website)
Michael G. Rubin (Source: Fanatics official website)
After business integration, Rubin kept the name of Fanatics for the new company and continued its way to expand.
In 2016, Fanatics acquired Kitbag, a British e-commerce platform, which allowed it to sell peripheral merchandise for teams such as Real Madrid and Manchester City.
Source: Fanatics official website
Source: Fanatics official website
At the same time, Fanatics is trying to lay out its league and club licensing business. In 2016, Fanatics began operating the flagship shop of the NBA (National Basketball Association) in New York.
In the same year, it entered into a long-term partnership with the NFL (National Football League), becoming the largest manufacturer and distribution platform for NFL products.
Source: Fanatics official website
Source: Fanatics official website
In January 2019, Fanatics and Walmart reached an agreement to begin selling its costume on Walmart's website.
Up to now, Fanatics has already launched commercial cooperation in several countries, including the UK, France and Japan, planning to further develop markets such as South America and Southeast Asia in the future.
Obviously, Fanatics will not miss out on the huge sporting merchandise market of China.
In March 2021, Fanatics announced that it will be partnering with Hillhouse Capital Group to form a joint venture to expand its business in the Chinese market.
Business
Fanatics is an American online retailer of licensed sportswear, sports equipment and merchandise.It currently carries licensed merchandise from over 300 leagues and brands.
Source: Fanatics official website
Source: Fanatics official website
What makes Fanatics a leader in the industry is its strong partnerships with the major leagues and clubs.
Since the end of the last century, Fanatics has been working with the major sports leagues, clubs and media to manage their official e-commerce platforms.
Today, Fanatics has partnered with all of the major professional sports leagues in North America, several internationally renowned professional sports clubs and several mainstream media outlets.
Source: Fanatics official website
Source: Fanatics official website
In October 2021, Fanatics also signed a new agreement with the International Olympic Committee to create the first global Olympic online shop to sell products for the 2024 Paris, 2026 Milan-Cortina and 2028 Los Angeles Olympic Games.
At the same time, Fanatics understands that technology and innovation are important ways to build core competencies and applies them in all aspects of its business.
On the one hand, Fanatics uses big data to support the operation of its business model.
For example, the company has built a comprehensive data platform that monitors more than 200 indicators, such as the number of searches on the platform, social media discussions and sales data.
This allows the company to predict the next rising sports stars and to produce their peripheral merchandise quickly to meet consumers' purchasing needs accordingly.
On the other hand, Fanatics also provides consumers with a good shopping experience through technology.
The company has built a highly efficient supply chain system to enable customers to buy their desired products quickly through its online platform and to ensure that the products are delivered to them within 3 working days.
Source: Fanatics official website
Source: Fanatics official website
Recently, Fanatics is also transforming into a diversified digital platform that includes a wider range of businesses such as sports collectibles (player cards) and sports betting.
Financial Situation
A spokesperson for Fanatics said that the company's revenue grows in line with the expansion of its commercial footprint.
For a long time, Fanatics' main revenue came from the sale of licensed sports merchandise and its e-commerce services for related sports leagues and media brands.
The last two years have seen unprecedented growth in the trading of player cards.
According to Verified Market Research, the global card trading market is expected to grow from $13.8 billion in 2019 to $98.7 billion by 2027, at a CAGR of 23.01%.
Source: Fanatics official website
Source: Fanatics official website
Attracted by the huge cake, Fanatics, which had never been involved in the card trading business before, set up a branch in 2021 to specialize in the new business and soon afterward acquired the copyright of MLB, NBA and NFL.
In 2021, Fanatics' business grew by 30%, with revenues increasing from 2.6 billion dollars in 2020 to $4 billion.
Rubin forecasts that Fanatics' revenue is expected to grow to $4.5 billion by 2022 on current trends.
Valuation
Since 2012, Fanatics has undergone nine rounds of funding, with a total funding amount of $4.2 billion. Major investors include Silver Lake Capital, Temasek Holdings, Lastseen Ventures, Andreessen Horowitz, Neuberger Berman Group, etc.
Pre-IPO pedia | Valuation at $27 billion, how the sports e-commerce empire of Fanatics is built
In September 2017, Fanatics received a $1 billion funding round led by SoftBank Group, with its valuation at $4.5 billion.
In August 2020, Fanatics received a $350 million funding round led by Thrive Capital, making its valuation at $6.2 billion.
In August 2021, Fanatics raised $325 million from investors, including SoftBank Group, Silver Lake Capital and Jay-Z, with its valuation soaring to $18 billion.
In March 2022, Fanatics received $1.5 billion in funding, with the NFL being the single largest investor in the round, contributing $320 million. This round of funding valued the company at $27 billion.
IPO Rumors
The rapid growth of Fanatics has led to a lot of speculation that an IPO for the company is close at hand.
Source: Fanatics official website
Source: Fanatics official website
In March 2021, Rubin responded to rumors of an imminent IPO by saying that "IPO is an option that we often talk about, but it is not something we focus on today, at the moment we focus more on building the business."
However, insiders also believe that Fanatics has a highly diversified investor base and a sizable private placement valuation, which makes it still a possible IPO candidate in the next 6-24 months.
Mooers, what do you think of Fanatics' business layout and IPO prospects? Feel free to discuss below.
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