Everything you need to know about FaZe Clan's billion-dollar SPAC deal
The esports organization is about to go public.
FaZe Clan is more than a group of skilled gamers. Since 2010, this esports-focused company has become a prominent organization with many sponsorships, merchandise, and influencers. Following a wild year for the stock market, FaZe Clan is making a bold move by going public.
FaZe Clan’s shift to be a publicly-traded company is quite surprising, mainly because it’s not doing so through a traditional initial public offering (IPO). Instead, it’s merging with a SPAC company and becoming publicly traded on NASDAQ.
If FaZe Clan’s new strategy is confusing to you, here’s a closer look at exactly what’s next for the iconic esports company.
What happened — On October 25, 2021, FaZe Clan announced that the company would be merging with a SPAC called B. Riley Principal 150 Merger Corp. rather than making an IPO. The company released a video announcing the news on Twitter.
FaZe Clan raised around $118 million in private investments ahead of the merger, and the organization claims that the estimated transaction proceeds of the merger are around $297 million. When all is said and done, FaZe Clan’s press release claims that the company will have $275 million in cash on its balance sheet and a valuation of $1 billion.
So, if you’re unfamiliar with FaZe Clan or the stock market, what should you make of all of this?
What is FaZe Clan? Founded in 2010, FaZe Clan is one of the most prominent esports organizations. The organization’s website currently lists 89 members, each of whom has massive followings on platforms like YouTube and Twitch. They often have teams compete in games like Call of Duty, Counter-Strike: Global Offensive, Fortnite, and Valorant.
Over the past decade, competitive video games esports competitions at large have drastically increased in popularity, and FaZe Clan has been right in the middle of it. The company makes money by winning esports competitions, sponsorships, Twitch subscriptions, selling lots of FaZe Clan-themed merchandise, and producing digital content.
The organization claims to have an audience of around 350 million people and often tries to hop on new money-making trends like cryptocurrency and NFTs. These initiatives have led to a fair bit of controversy, but FaZe Clan is still a large, recognizable brand that appeals to young people. That’s why it’s not surprising that the esports organization is now doing a SPAC listing.
What is a SPAC? An acronym for “special purpose acquisition company,” the SPAC is one of Wall Street’s latest fads. The making purpose of a SPAC is to buy or merge with other companies to make them publicly traded on the stock market.
By merging with a SPAC, a company can become publicly listed while avoiding the struggles of an IPO. For a company like FaZe Clan that’s popular but wants to avoid a risky IPO, a SPAC offers a more trendy, straightforward way of going public and causing some buzz — while making its owners and investors money in the process.
Why FaZe Clan is valued at $1 billion — Currently, FaZe Clan and B. Riley Principal 150 Merger Corp. believe that number accurately represents FaZe Clan Holdings Corps.’s cash flow, current value, and potential earnings growth going forward for investors. The press release announcing the public listing teases FaZe’s future:
FaZe Clan plans to further diversify its revenue streams with user monetization, expansion of its global footprint, and investment in new growth opportunities across the creator economy and emerging technologies in addition to a robust acquisition strategy that will only strengthen the Company’s flywheel.
FaZe Clan has a large, young audience that’s already proven that it’s interested in engaging with its creators and products. A public listing will only bring more attention to the company and brand too. As such, a $1 billion valuation seems realistic to the company.
It remains to be seen if FaZe Clan will be able to successfully capitalize on its SPAC strategy following the meme GameStop stock situation earlier in 2021 or if it will disappoint investors as this organization hops on another trend.
Regardless, his shift will likely change the company — and perhaps game and esports at large — forever.