Fanatics Denies Reports of Revenue Decline, Rubin Sell-Off

On Monday, a panel of judges in Boston made it clear they are likely to side with DraftKings in an ongoing legal battle between the gambling company and Fanatics.

It would turn out to be just the beginning of a brutal week for Fanatics and its billionaire founder and CEO Michael Rubin.

Earlier this year, Rubin poached Michael Hermalyn, a former senior vice president, from DraftKings; the gambling company sued in February, saying that Hermalyn had a noncompete clause in his contract and accusing him of a “secret plan” to steal business secrets from DraftKings and use them at Fanatics. (Editor’s note: Separate from his role at Fanatics, Hermalyn is an “advisor” at SC Holdings, a company that is an investor in Front Office Sports.)

DraftKings won a temporary injunction against Hermalyn this spring that barred him from doing much of his current job at Fanatics. Hermalyn is appealing the injunction, which currently runs through February 2025. At a hearing for his appeal Monday, at the federal 1st U.S. Circuit Court of Appeals in Boston, two of the three judges appeared skeptical of Hermalyn’s case, pressing his lawyer on why his move to California would void his noncompete agreed to with DraftKings in Boston.

Hermalyn relocated to California for his new job with Fanatics, and his lawyers have leaned on the argument that noncompetes are illegal in the state. (Fanatics and Hermalyn are also suing DraftKings in California, where a court recently said they were “likely to prevail on the merits of this case.” A representative for Hermalyn told FOS that “California has long upheld the right of workers to pursue their livelihoods—and recognizes that non-compete restrictions are unfair restraints of trade… Put simply, he wants to work.  And he is free to do so in California.”)

Separately, two similar newsletters, both targeted at wealthy fans of media gossip, ran aggressive stories about Rubin this week. Air Mail and Puck ran lengthy investigative stories about recent legal and financial woes at Fanatics.

The Air Mail story contains the most damning reporting, which spokespeople for Fanatics vigorously contested to Front Office Sports and other outlets. According to Air Mail:

• Rubin “could be looking to sell up to $1 billion of his stake” in the company.
• The company’s revenue is set to decline by 14% in 2024.
• There’s “growing concern among the credit-ratings agencies that Fanatics is facing rougher seas” ahead.

Fanatics denies the claims about Rubin selling and the revenue dipping. (The credit agencies’ assessments of the company are a matter of public record.) Fanatics is a privately held company and does not generally open its books; according to Air Mail, Rubin’s interest in selling his private shares stems from the company’s failure to launch an IPO this year.

In an interview with FOS, a spokesperson for the company said that the premise of the Air Mail story was false, that Rubin was not looking to sell his shares, and that he has had “no discussions” about doing so. While Air Mail, citing a source, has 2024 revenue declining by $1 billion this year, Fanatics says the opposite: That revenue is up 17% to date this year, which would be $1 billion in new revenue in 2025. “Margins are meaningfully up this year,” the spokesperson says.

These denials also appeared in the Air Mail story, which quoted the spokesperson saying of an IPO, “Right now, we’re heads-down on building our business.” 

A company source tells FOS that while an IPO is “the most likely long-term outcome” for the company, it has never made it to the stage of interviewing bankers for an offering.