Investing in Fanatics | How to Buy Pre-IPO Shares

Fanatics is a leading sports e-commerce platform designed to enhance the fan experience. The company combines licensed products, such as collectibles and apparel, to empower fans to show support for their favorite teams in unique ways. Today, Fanatics collaborates with over 900 venues and more than 5,000 athletes to connect fans and teams globally.

Fanatics currently hosts one of the largest and most successful sports memorabilia and collectibles communities. As such, the company continues to attract more investors. However, it’s privately owned and operated, meaning you can’t buy Fanatics shares from traditional exchanges like the NASDAQ or NYSE. Instead, you will need to navigate the secondary markets to qualify for these assets. Here’s what you need to know.

What is Fanatics?

Fanatics entered the market in 1995 in Jacksonville, Florida. The company was initially named Football Fanatics. Its founders, Alan and Mitch Trager, wanted to create a location that supported their local NFL team, the Jacksonville Jaguars.

Their first store was a brick-and-mortar shop that initially only focused on Jaguar merchandise. However, it wasn’t long before the NFL recognized the company’s potential, and the brothers quickly secured licensing to create official products and apparel. Soon, they expanded their operations to a catalog, which enabled the brothers to service all teams’ fans. The company also expanded into college team merchandise during this time.

Everything changed for Fanatics in 2011, when GSI Commerce, run by Michael Rubin, acquired the firm. Later, Rubin would sell GSI and use the funds to take Fanatics private. From there, he integrated an e-commerce strategy that saw the company offering a mix of exclusive licensed sports merchandise, trading cards, and collectibles. Not long after, the company would integrate sports betting, gaming, live commerce, and fan events.

Fanatics Commerce

Fanatics Commerce is a critical component of the company’s business model. This live market enables fans to find, buy, and even customize licensed fan gear, jerseys, headwear, and hard goods. As part of this strategy, the company launched  www.fanatics.com.

Source – Fanatics

This website is vertically integrated into the Fanatics experience. Users can find both physical and digital products to express their support for their favorite team or athletes. Impressively, some products show support for a vast selection of leading sports leagues, teams, athletes, colleges, and associations.

Lids

Fanatics has always shown an interest in operating physical locations alongside its ecommerce strategies. Currently, the company has over +2000 Lids stores in operation. These stores are primarily located in malls and offer hats that can be customized to meet your personality or preferences. Notably, Lids carries NFL, MLB, NBA,  and NCAA college apparel. Additionally, the store has locations globally in North America, Europe, and Australia.

Fanatics Collectibles

Fanatics Collectibles is another core aspect of the company’s approach. The platform operates as a one-stop shop for memorabilia and collectibles. Since its launch, Fanatics has grown into one of the largest and most successful developers, designers, and sellers of physical and digital trading cards, collectors’ memorabilia, and other products designed to capture great moments in sports history.

Fanatics Collect

Fanatics operates a secondary trading card market that helps connect collectors and fans securely. The Fanatics Collect market allows users to see vital details about collectibles, including scarcity and value. Additionally, it ensures that collectors can always find interested parties and others who share their passion for sports.

Topps

Topps is the most established trading card company in the market today. It launched in 1938 and primarily produced baseball cards. In 2011, it signed an exclusive deal with the MLB, further in its market penetration and exclusivity. Fanatics acquired Topps in January 2022. Since that time, Topps has been fully integrated into the Fanatics ecosystem, adding value and legacy to the company’s reputation.

Fanatics Betting & Casino

Fanatics raised the ante when they integrated sportsbook betting and Casino games. These options enable users to make real-money wagers alongside playing digital casino games, including slots, roulette, and blackjack. While still not available in all states, Fanatics is licensed to offer online gambling in 23 states.

Historical Funding Rounds

Summary of Fanatics Funding:

Total Funding: Fanatics secured $4.85B across 10 funding rounds.

Largest Round: Fanatics’ largest funding round secured $1.54B on December 15, 2021.

Investors: A total of 24 institutional investors and 1 Angel investor back Fanatics.

Latest Round: The latest funding round raised $325M and was a Series D round held on August 10, 2021.

Funding Rounds Breakdown:

• 2 Early-Stage
• 7 Late-Stage
• 1 Debt

Key Investors:

Fanatics secured investment funding from Clearlake Capital Group, LionTree, Fidelity Investments, Silver Lake, SoftBank Vision Fund, BlackRock, MSD Capital, Rocnation, MLB, Insight Partners, Eldridge Industries, Blackstone, Neuberger Berman, Thrive Capital, Franklin Templeton India, Franklin Templeton Investments, MLB, NFL, Alibaba Group, Temasek, Bank of America, and more.

Why Invest in Fanatics?

There is a long list of reasons why investing in Fanatics could be a smart move. For one, the company operates a broad range of online, sports venue, and brick-and-mortar locations, providing it with impressive market penetration. This business model enables the company to react to changes in its markets globally. Additionally, it currently operates over +80 facilities and offices globally.

Exclusive Memorabilia

Fanatics Authentic focuses on creating and validating sports memorabilia. All of its collectibles are officially licensed and are unique one-of-a-kind offerings. This approach provides validity to an industry that is rife with fraud.

A recent FBI sting called “Operation Bullpen” found that as much as 90% of all sports memorabilia is fraudulent. Fanatics helps to solve this issue through its in-depth licensing and validation processes. Collectors can always find authentic and exclusive gear at Fanatics.

Partnerships

One of the primary reasons why investing in Fanatics could make sense is that the company has secured high-level strategic partnerships with leading sports organizations. It’s not an easy task to secure licensing from the NFL, NBA, or MLB. Consequently, it’s seen as a major reason why Fanatics has such strong support from investors and fans. Specifically, the company has partnerships with the NFL, NBA, MLB, NHL, MLS, Formula 1, and Australian Football League.

Loyalty Program

Fanatics continue to innovate and create new ways to connect fans and teams. This loyalty program is a perfect example of how the company leverages its unique production capabilities and access to generate value for users. Those who show support for their teams receive exclusive benefits ranging from digital collectibles all the way to live event tickets and more.

Fanatics China

It’s easy to remain focused on the American markets. However, Fanatics has seen into the future and has already made plans to expand operations globally. Fanatics China is the company’s new Asian focused division. It focuses solely on the Chinese sports market, which is currently reported to add +209B in value to the economy.

Funding and Investor data sourced from Tracxn

1. Pre-IPO Secondary Marketplace

Secondary markets are purpose-built exchanges that connect pre-IPO shareholders with potential investors. These marketplaces can offer these assets because they work closely with employees, early-stage investors, and venture capitalists, who are crucial to the company’s pre-IPO growth.

Investing in pre-IPO shares of Fanatics could offer strong returns if the company’s valuation increases following its IPO. It’s common for company valuations to increase following an IPO. As such, it makes sense to add pre-IPO shares to your portfolio before the firm announces plans to go public.

Secondary marketplaces have many requirements. Here are some concerns you should be made aware of:

Eligibility: This approach requires you to be an accredited investor, meaning you will have to show at least $1M in liquid assets to qualify for access.

2. Private Equity Firms

Private equity firms gain access to pre-IPO shares during investment rounds. They then offer these shares to high-net-worth accredited investors with a commission. Notably, private equity firms are known to have extra stipulations, including blocking the sale of shares for years in some cases.

3. Employee Equity Sales

Many consider employee equity sales as the best way to acquire pre-IPO shares in Fanatics. This method of acquiring pre-IPO shares requires you to connect with former employees. It’s common for companies to issue shares as part of an incentive package. Notably, this profit-sharing method has gained popularity, leading to more pre-IPO share opportunities for investors.

Private Transactions: There are a lot of hoops you will need to jump through to complete a private pre-IPO transaction, including creating specific legal agreements, conducting valuations, and setting in place any limitations on the transfer of the asset.

Brokerage: Brokers will take a lot of the confusion out of the pre-IPO process. These professionals can guide you through each step, ensuring full compliance and avoiding common errors untrained professionals make.

There are several risks to consider before investing in pre-IPO shares. Here are the top concerns:

Liquidity Risk

If you are looking for an asset to sell immediately, pre-IPO shares may not be the best option.

These investments can include sales and transfer clauses that prevent the transfer of the asset until certain criteria, such as the IPO’s completion, are met. It’s even common for pre-IPO shares to require you to wait years before gaining the ability to sell your assets.

Finding a Broker

If you meet the requirements and are comfortable with the risks, several platforms offer access to pre-IPO opportunities:

Forge Global: One of the largest private stock marketplaces, offering shares in late-stage startups like SpaceX, Stripe, and Databricks. Minimums typically start around $100,000.

EquityZen: A popular platform allowing accredited investors to buy into private companies with minimums as low as $5,000. Past offerings include companies like Discord and UiPath.

Rainmaker Securities: A full-service broker that helps source and negotiate private share sales, including opportunities in companies like OpenAI, Stripe, and Palantir.

Hiive: A newer platform with live bid/ask pricing for hundreds of private companies. Transparent and low-fee, with minimums starting around $25,000.

MicroVentures: Offers pooled access to late-stage companies through special purpose vehicles (SPVs), including past investments in SpaceX and Instacart.

EquityBee: Allows investors to fund employee stock option exercises at startups, often at discounted valuations, with minimums around $10,000.

Augment: A digital-first marketplace showing real-time pricing for pre-IPO shares, targeting tech-savvy investors and offering lower transaction fees.

StartEngine Private: Launched in late 2023, this platform offers accredited investors access to Regulation D offerings in later-stage, venture-backed companies. In its first nine months, it generated $16.5 million in revenue, with average investments of around $32,000

Important: Always perform thorough due diligence and consult a financial advisor before investing in private company shares.

Valuation of Fanatics and Future IPO

Fanatics secured Unicorn status on December 06, 2022, after receiving a $31B valuation. The company secured this value in multiple ways. For one, it managed to secure high-level strategic partnerships with leading sports organizations and players. Many of these agreements included exclusive rights to create memorabilia.

Additionally, Fanatics has a unique blend of brick-and-mortar, sports venue, and e-commerce sales channels. This diversity enables the company to maximize its licensing and directly impact the fan experience. Now, with the company’s expansion into gambling and casino options, it’s taken its strategy a step further.

Those holding Fanatics Pre-IPO shares seek to capitalize on the company’s exclusivity, positioning, and forward-looking business model. If Fanatics can retain its current trajectory, there’s a great chance that it will remain the dominant provider of sports collectibles and memorabilia, resulting in increased share values.

Investing in Fanatics Pre-IPO Shares | Conclusion

Holding Fanatics pre-IPO shares opens the door for future opportunities. The company has exclusive rights and agreements with some of the world’s top athletes and organizations. Additionally, its innovative spirit has led it to expand further into more digital memorabilia and gaming, deepening its reach.

Despite its successes, it’s always recommended that you do more research into any company before making any final investment decisions. Pre-IPO shares have unique restrictions that could increase your risk exposure. As such, you should consult a financial expert. For those who can qualify for Fanatics’ pre-IPO shares, it could position you for future returns.

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Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or investment advice. Pre-IPO shares are typically available only to accredited investors and carry significant risk. Always perform thorough due diligence and consult a financial advisor or legal expert before making investment decisions.