FaZe Clan is an Esports and entertainment company based in Los Angeles, United States. And it’s the latest headline-grabbing company to go public via special purpose acquisition company (SPAC) at a sensational $1 billion valuation.
FaZe Clan, which builds brands for content creators and Esports professionals, will launch on the NASDAQ, using the ticker symbol FAZE.
What SPAC is FaZe merging with?
The SPAC in question is B. Riley Principal 150 Merger Corp (NASDAQ: BRPM), and FaZe Clan intends to raise an estimated $291 million in the deal.
BRPM stock rose 15% on the news and is up another 5% in pre-market trading.
It's only a year since Forbes slated FaZe Clan as the fourth most valuable Esports company, worth approximately $305 million. Incredibly, this deal makes FaZe Clan the first Esports company to achieve a $1 billion valuation.
FaZe Clan's revenues reached $50 million in 2021, but the company is not yet profitable, and its CEO Lee Trink says it is unlikely to be in the next few years.
Nevertheless, from a $50 million revenue stream to a $1 billion valuation is a 20X return. That's an impressive feat in such a competitive space.
Embracing the SPAC phenomenon
SPAC deals often come with a private investment in public equity (PIPE) to enable the deal. This is true of the FaZe Clan merger, which will raise $120 million via the PIPE.
Going public via SPAC is not new, but its popularity has surged over the past eighteen months. The appeal of the SPAC is that it bypasses some of the regulatory hurdles present in a traditional public offering. However, it is less transparent in its intentions. Therefore shareholders don't always know how their investment will be spent.
Some SPACs have been very successful, while many have crashed and burned.
Draftkings (NASDAQ: DKNG), Opendoor (NASDAQ: OPEN), Skillz (NYSE: SKLZ), Danimer Scientific (NYSE: DNMR), Quantumscape (NYSE: QS), and Virgin Galactic (NYSE: SPCE) all went public via SPAC. Now former President Donald Trump is planning to take his Truth Social media network public via SPAC DWAC.
Lee Trink, CEO of FaZe Clan, told the Wall Street Journal:
“The big opportunity is our direct relationship with the massive audience we have. It’s a very large, very vibrant community that we’re deeply rooted in.”
It is not clear how much control Trink will retain, but existing shareholders in FaZe Clan will own 68% of the publicly-listed company.
FaZe already has a vault of impressive investors backing the venture. Musicians Pitbull, Offset, and Swae Lee are involved, as are professional athletes Kyler Murray, Ben Simmons and Nyjah Huston.
Some of its notable investors double as content creators on the platform, along with LeBron James' son Bronny.
Along with Esports, the company intends to focus on brand partnerships, content creation, merchandising and social media.
FaZe has already built solid relationships with recognized brands such as McDonald's, DC Comics, Sports Illustrated, and Doritos.
With access to $275 million in cash on the balance sheet, there's speculation M&A activity may come hot on the heels of the deal closing. Or it may opt to expand its global footprint and invest further in content creation.