Explaining the whopping $10 billion valuation for Fanatics’ nascent trading card business

September 30, 2021 – Media Mention

Irwin Kishner, co-chair of Herrick's Sports Law Group, spoke to CNBC about the recent $10 billion valuation of Fanatics' trading card business. Fanatics is a sports merchandise company with separate trading card and merchandise businesses. The article stated that they "raised a $350 million round one month after capturing licensing rights for top sports leagues, including Major League Baseball and the National Football League."

In reference to the $10 billion valuation, Kishner said it's possible to "articulate pretty good reasons as to how they got there." He explained that Fanatics' valuation factors in more than traditional valuation metrics like discounted cash flows, comparable companies in a sector, EBITDA, and cost of assets.

"You’re looking at what the projected cash flows can be for each of their business segments, and that’s what you’re valuing this business on," he explained. He added, "A lot of what you’re betting on is management," referring to Fanatics' hiring of executives like former IAC chief financial officer Glenn Schiffman, among others. 

The article quoted an anonymous Wall Street CEO who believed the trading card agreements to be "a futures contract since the company can’t produce the collectibles yet." 

"I understand that statement because they haven’t fully executed yet on their potential -- yet," said Kishner when asked if he agreed with the characterization. He further explained, "But the way they got the baseball contract, the way they’ve been picking up various management talent from around various companies, and positioned themselves as a technology company -- you’re talking about bringing together under one roof NFTs, paper trading cards, and blockchain technology. So, there’s a lot here." He added, "You’re buying an asset that you anticipate will grow higher because of market forces and the way you position that asset[.]"

Kishner said Fanatics’ business plans resemble investing in real estate, adding it "seems high now, but 10 years from this date, you’d wish you bought it."

He concluded with a bold bet: "They’ve aligned themselves with various leagues, took the Topps business plan and made it their own," adding, "This company is going to be a disruptor."

Read the full piece in CNBC here.