FaZe Clan Will Go Public in a $1 Billion SPAC Deal
- FaZe Clan, the popular gaming, lifestyle, and media platform, announced they will be going public via a merger with B. Riley Principal 150 Merger Corp.
- B. Riley Principal 150 Merger Corp. is a special purpose acquisition company, also known as a SPAC.
- The FaZe and B. Riley Principal 150 Merger Corp. merger is valued at approximately $1 billion and will be traded on the NASDAQ as ticker: FAZE.
Intro to FaZe Clan
FaZe Clan is an e-sports media platform and lifestyle brand created for and by Gen-Z and Millennials. Their presence in the e-sports scene has exponentially grown since their formation in 2010. The company claims to have a combined reach of 350 million people via social media. Recently, FaZe Clan has recruited more well-known content creators to promote their brand, including NBA star Ben Simmons and Lebron James’ son, “Bronny” Junior.
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FaZe Clan has a total of eighty-eight (88) official members. Forty-four members are professional gamers, and the remaining are digital content creators. The Clan also has twelve e-sports teams, which compete in e-sports competitions for audiences worldwide.
On October 25, 2021, FaZe announced via social media that it would be going public in 2022. However, instead of going public through an initial public offering (IPO), FaZe will be merging with the public company B. Riley Principal 150 Merger Corp. (BRPM). Once their merger is complete, BRPM will change its name to “FaZe Holdings Inc.” The combined company’s common stock is expected to be listed on NASDAQ under the new ticker symbol FAZE.
Intro to SPACs
SPACs are special purpose acquisition companies or “blank check” companies. SPACs raise money from investors through an IPO to acquire a privately held company in the future. The funds raised during their initial public offering are stored in a trust that earns interest. However, if a SPAC does not acquire a company within two years, it must return its money to investors.
One of the advantages of going public via a SPAC merger is the shortened timeline. While an IPO takes six months to 1+ year(s) to process, a SPAC acquisition can be completed in a couple of months. In addition, once the SPAC and the privately-held company are merged, the SPAC stock name is changed and traded under a new ticker.
What does it mean to go public via a SPAC?
If a company wants to go public, they have two options. As previously mentioned, the first option is to go through an initial public offering (IPO). An IPO allows the public to buy and sell new equity shares of the company on an exchange, such as the NASDAQ or NYSE. However, the IPO process can be lengthy as the company must go through underwriting, filing, valuation, and more.
Going public via a SPAC is the alternate or “back door” option. This route is typically shorter than taking the IPO route. Since a SPAC is already public and its stock is available to investors, the acquired company does not need to go through all the steps in an IPO process. This option saves the company time and money.
Due to the benefits of going public via SPACs, they are surging in popularity. According to The Hustle, in 2020, 248 SPACs went public and collectively raised $83 billion from investors. Compared to 2019, 2020 saw a 400% increase in SPACs. Compared to IPOs, SPACs have become significantly more popular in the past couple of years.
Despite the popularity, many SPACs have been underperforming. According to a Renaissance Capital strategist, “almost 70% of SPACs that had an IPO in 2021 were trading below their $10 offer price as of September 15, 2021.”
Although FaZe Clan’s announcement was shared last week, investors can expect to see ticker FAZE as a public listing on the NASDAQ sometime in 2022.
What does this move mean for current gamers and e-sport fanatics?
FaZe is not the first eSports company to go public. Many similar companies have gone public at a fraction of FaZe’s value. Therefore, many analysts are skeptical about FaZe Clan’s billion-dollar valuation. However, the market for gamers and esports fanatics is growing rapidly.
According to Statista, the global market for eSports is roughly $1 billion. By 2025, the global market is expected to be $2.89 billion. United States eSports viewership reach is also expected to grow from 13% to 15% in the coming years.
One issue highlighted by critics is that a large portion of FaZe Clan’s fanbase is Gen Z. Although Gen Z children may be active fans of FaZe, many will not be old enough to purchase their stock once FaZe goes public on the NASDAQ. However, the acquisition is promising for eSports fanatics across the globe. In addition, the makers of popular video games, such as Fortnite, League of Legends, FIFA, and riot games, may also look to profit from this move.
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With a growing fanbase and a billion-dollar valuation, FaZe Clan is expected to grow and possibly take over the eSports industry. However, FaZe Clan is estimated to bring in only $50 million in revenue this year. Additionally, only about $300 million of their $1 billion valuation will be raised in cash by FaZe and BRPM.
In response to the press and critics, FaZe Clan’s CEO, Trink, reminded the public that FaZe is not solely an esports brand. Trink notes, “Esports is a challenging business, which is why we don’t rest the entirety of the business on that revenue.” With FaZe’s valuation, it is expected that FaZe Clan will look to acquire similar or related brands and companies to diversify revenue streams.
Main Image Credit: Roman Kosolapov / Shutterstock.com