Fanatics aims to become a $100 billion company with this strategy.

• Recently, Fanatics has experienced rapid growth and is now valued at $27 billion, according to the company.
• An e-commerce company that sells official sports merchandise to fans is expanding into online sports betting, sparking speculation about an IPO as investors pour in.
• Despite having investors from the NFL, Fidelity, and SoftBank, Fanatics does not plan to go public this year, according to a source.

Fanatics, a sports e-commerce company, is expanding rapidly but is far from its goal of becoming a $100 billion empire within the next decade. The company recently valued at $27 billion.

The NFL's recent $320 million investment in the company has boosted its investors' confidence.

Fanatics is valued at $5 billion, according to sources who spoke to CNBC on condition of anonymity, as the company does not publicly disclose its financial information. The NFL, MLB, NBA, NHL, MLS, and various players unions all have a stake in the company.

Sports merchandise, including jerseys and other apparel, as well as sports-themed home, office, and automotive consumer products, are available at Fanatics. The company could benefit from increased attendance at games as governments lift Covid restrictions. Additionally, Fanatics is expanding into online sports betting.

Michael Rubin, CEO, is confident and declares his objective to dominate the sports e-commerce market and expand further.

At a conference in March, Rubin stated that he was fully committed to making Fanatics the best digital sports platform globally.

Fanatics has some skeptics, too.

One executive expressed doubt about Fanatics' $27 billion valuation, stating, "I'm still not convinced it's worth that much."

The executive, who spoke to CNBC on the condition of anonymity, expressed skepticism about Fanatics' private status. Private companies are not obligated to report earnings to the SEC, which means they can hide revenue struggles.

The executive stated that because they have to anticipate the contribution of each business line to the revenue and EBITDA and how it will change for the future, they can get away with a lot more. Additionally, the leagues are partners, so it's in their best interest to elevate the value.

Fanatics declined to comment for this story.

Fanatics experienced rapid growth for two years before securing their latest investment round. The company's valuation increased from $6.2 billion in 2020 to $12.8 billion in March 2021 and reached $18 billion in August. Insiders suggest that Fanatics aims to achieve a $10 billion EBITDA over a 10-year period.

According to sources, Fanatics is projected to generate approximately $6 billion in revenue in 2022 and aims to achieve $10 billion in revenue in the near future.

Building a juggernaut

The NFL, MLB, NHL, and Qatar Investment Authority were revealed to have driven Fanatics' $1.5 billion funding round, which was announced days after the comments from Rubin and the executive.

Rubin stated at the MIT Sloan Sports Analytics Conference in Boston on March 4 that the company they are considering building should aim to be cherished by billions of sports fans worldwide, and valuation will stem from the company's performance.

Fanatics has experienced significant growth through acquisitions, notably during the pandemic shopping surge. In 2020, the company expanded its e-commerce business by purchasing WinCraft, which produces sports-themed merchandise. In 2022, Fanatics acquired Topps trading card company for $500 million, and formed partnerships with major sports leagues and their players unions in 2021.

Fanatics acquired 700 licensing rights to NCAA schools through its WinCraft purchase, and also utilized MLB's e-commerce rights to generate future blockchain revenue with its NFT company Candy Digital, which is currently valued at $1.5 billion.

Fanatics already had exclusive licensing deals with the NFL and Nike to make jerseys and an exclusive e-commerce deal with Walmart. In addition to these deals, Fanatics has recently secured new revenue streams from Topps, a team e-commerce deal with the Dallas Cowboys, and global rights to the Olympics. As a result, industry insiders predict that Fanatics will generate $1 billion in EBITDA in 2022.

Fanatics' future attracts sports leagues due to its products, while investors appreciate its direct consumer engagement.

Fanatics is projecting $4.5 billion in revenue for its e-commerce business in 2022, which is a significant increase from the $2.3 billion it generated before the pandemic.

Fanatics is utilizing technological advancements, including artificial intelligence, cloud computing, and machine learning, to drive growth and enhance its capabilities. The company boasts 80 million users and has up to 16 data attributes per consumer, which enable it to personalize offers to its consumers.

IPO in the cards?

Fanatics is attracting several major investors as it approaches a potential initial public offering, which could bring significant returns.

SoftBank, an investing firm, has attracted the support of several notable investors, including Fidelity, Thrive Capital, Franklin Templeton, and Neuberger Berman, as well as Chinese e-commerce giant Alibaba Group.

Peyton Manning, Jay-Z, Lil Baby, Michael Dell, and Joseph Tsai are all investors in the NFL.

Fanatics' projected $10 billion trading cards business has investors including Silver Lake, Insight Partners, and entertainment company Endeavor.

According to sources, the company will not be going public this year, so investors may need to wait a bit longer for an IPO.

Fanatics targets sports betting

Several obstacles could hinder fanatics' pursuit of a $100 billion valuation.

Recession fears are on the rise due to surging inflation, while geopolitical strife in Ukraine and U.S.-China relations could negatively impact international growth. Additionally, antitrust concerns have emerged over Fanatics' agreement with the NFL, which some allege is a form of collusion that harms competitors. This could potentially lead to a future challenge from the government.

Despite appearing pessimistic publicly, Rubin maintains an optimistic outlook privately about the future.

The CEO stated that every industry undergoes significant transformations and that sports, although he believes to be the greatest form of entertainment, must remain relevant, innovative, and fresh.

Fanatics, which has long expressed interest in online betting, recently hired former FanDuel CEO Matt King and applied for a gambling license in New York, indicating that it plans to compete with DraftKings, FanDuel, and other companies in the space.

WynnBET is reportedly on the market for $500 million, but people familiar with the business downplayed speculation about a potential acquisition by gambling company Fanatics.

Fanatics is projected to lead the betting category in 10 years due to its 80 million users and lower customer acquisition cost of $19, compared to the average for betting companies.

Fanatics can use the low cost in the e-commerce space to attract new customers and then utilize sports betting within their ecosystem.

According to Rubin, the cost of acquiring a customer in online sports betting is $500 on a good day. Instead of spending $500-plus and having a multiyear payback in a highly promotional environment, Rubin prefers to look at different places to acquire customers and cross-sell them into online sports betting.

The revenue projections for Fanatics in this story have been revised to provide more specific details.