News Profit's Takes

SPAC Merger Leads To $1B Valuation For FaZe Clan

On October 25th, FaZe Clan announced it was combining with a special purpose acquisition company (B. Riley Principal 150 Merger Corp.) in a deal that will see FaZe become a publicly-traded entity. According to Variety, this deal gives FaZe Clan an implied value of $1 billion.

The estimated gross transaction proceeds of this deal will total $291 million. This will include $173 million in cash from BRPM’s IPO proceeds as well as $118 million from committed PIPE (private investment in public equity) investments.

Once the proposed merger is complete, BRPM will chan get its name to FaZe Holdings Inc. Additionally, the combined company’s stock will be listed on the NASDAQ market under the ticker symbol “FAZE”.

“In our short history, we have evolved from a disruptive content generator to one of the world’s most decorated and successful esports franchises, and now in to one of the younger generations’ most recognized and followed brands globally,” FaZe Clan CEO Lee Trink said in a statement.

The Profit‘s Take:

It’s funny that this article started with the term “esports company” rather than “apparel company.” 100 Thieves is always referred to as an apparel company or lifestyle brand. This is the first standalone $1 billion esports org. One of the reasons to go public: if you are a shareholder of FaZe, you just created a ton of wealth for yourself. They’re expecting to make $50 million in revenue in 2021 while planning to lose $19 million. There’s no way they made money in previous years. It makes sense though that they keep securing funds through these private financing rounds so that they can sustain their business. The breakdown is interesting, $3 million in esports and gaming during 2020, which is roughly 10% of their revenue last year. I was also surprised by how much they made on content. It was a third of their revenue in 2020! It may be unfair to continue to call FaZe Clan a hoodie org because while they have ambitions to make a lot of money over the next few years, consumer products are only expected to be a small piece of their revenues by 2025. It’s hard to say hoodie org if they are planning on making a lot of their revenue from M&A and content. They still want to sell $50 million worth of hoodies in 2025, which is a lot and somewhat hard to believe. They’re basically striving to be a media company. I just think the media company story sells better right now. Their revenue numbers are VERY specific. It seems like everything would have to go perfectly in order for them to hit these projections. Investors seem to believe that the next-gen media companies haven’t been built yet. Maybe FaZe can become one of them. If they hit all their projections, then they are going to grow into their $1 billion valuation with no issue. Content is the keyword here. They are betting a lot on creating a ton of content, and I love to see it because that’s the focus here at Holodeck Media. FaZe does have a checkered past to worry about. As a private company, it’s easy to get away with that kind of stuff. As a public company, a lot of the dirt that they tried to sweep under the rug may see the light of day. If these things get unearthed, it could do a lot of damage to the business. Also, it was an interesting choice to not bring in an outsider with public company experience to join FaZe’s leadership team. It could be the difference between this working out and this flopping.

(All information was provided by Yahoo! Sports)

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