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Michael Rubin Is Selling His 10% Stake In The 76ers, Devils, And More
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Hey Friends,
Michael Rubin announced this week that he is being forced to sell his 10% stake in Harris Blitzer Sports & Entertainment (HBSE)—the parent company of several sports assets, including the NBA’s Philadelphia 76ers and the NHL’s New Jersey Devils.
But it’s a good problem because his main business, Fanatics, is getting too big.
“As our Fanatics business has grown, so too have the obstacles I have to navigate to ensure our new business don’t conflict with my responsibilities as part-owner of the Sixers.” Rubin said in a statment on social media. “With the launch of our trading cards and collectibles business earlier this year — which will have individual contracts with thousands of athletes globally — and a soon-to-launch sports betting operation, these new businesses will directly conflict with the ownership rules of sports leagues. Given these realities, I will sadly be selling my stake in the Sixers and shifting from part-owner back to life-long fan.”
HBSE recently brought on private equity firm Arctos Sports Partners as a minority investor at a $3 billion valuation, so the sale should net Rubin around $300 million.
And while it’s nearly impossible to determine his overall return on the investment without seeing the numbers—HBSE owns several sports assets & Rubin has increased his equity stake over the years—Michael Rubin was part of the ownership group that acquired the 76ers back in 2011 for $290 million. And given just that asset alone is now worth about $2.5 billion, he is probably up (+ or -) about 1,000% on the deal.
But after holding the equity stake in HBSE for more than a decade, he now moves on.
Fanatics is one of the biggest businesses in sports. The online retailer of licensed sportswear, equipment, and merchandise recently raised $1.5 billion at a $27 billion valuation, and Rubin has publically stated his goal is to build a $100 billion business.
Fanatics Valuation Growth
2019: $4.5 billion
2020: $6.2 billion
2021: $18 billion
2022: $27 billion (+500% since 2019)
And that’s because the business is no longer just a sports apparel company. For example, they launched a trading card business in October 2021. And less than a year later, they already have exclusive licenses with the NFL, MLB, and NBA, they raised $350 million at a $10.4 billion before ever producing an actual card, and they then used that cash to buy Topps for $500 million—representing a massive discount to the $1.3 billion valuation Topps nearly IPO’d at before losing their licenses to Fanatics.
It was an epic chess move. And that will probably end up being a big business (it’s already valued at $10 billion-plus). But the real prize appears to be in sports betting.
That’s because Fanatics is in a unique place. Most sports books are spending several hundred dollars to acquire each new customer right now (billions collectively), and they rush to new markets to try and build an early dominant market share position.
But through their apparel & licensing business, Fanatics is currently sitting on a database of more than 80 million customers. That number is growing by 10 million annually, which will be a massive competitive advantage in customer acquisition.
And given they hired away FanDuel CEO Matt King to run the new operation, Rubin has made his goal clear: to become the number one sportsbook globally.
“Online sports betting and iGaming is a business that we think, for us, will be a very significant business long-term,” Rubin told Yahoo Finance in February. "I'll put it out there: We want to be the no. 1 player in the world long term. So a decade from now, I'd be disappointed if we weren't the top player in the world, both in online sports betting, iGaming. We're just getting started.”
“This business, like a lot of businesses, so many people got into it early because of how big it's going to be, and it will be that big,” Rubin previously told Yahoo Finance. “And there's been so much money invested, and in a lot of cases, lost. I think this business would become a good business long-term. It's a very tough financial business today, people investing not hundreds of millions of dollars, but billions of dollars in losses this year, and will continue to do so."
"From our perspective," he continued, "we have probably the most digitally-oriented, transactional commerce brand, and we have the best database in all of sports. So that's a real structural advantage to help Fanatics become the ultimate leader in this business, and at the same time, give a better experience to the fan.”
So given his ambitious sports betting goals and the fact that NBA & NHL rules, with Michael Rubin as a 76ers & Devils owner, would prohibit Fanatics from taking bets on those teams, it was really only a matter of time before this happened.
There is still a long way to go. Fanatics hasn’t acquired any operators. They don’t have licenses, and the business is just a trademark and an idea at this point. But this is a step in the right direction, and it puts everyone on notice—Michael Rubin is serious.
I hope everyone has a great weekend. I’ll talk to you on Monday.
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