Fresh out a major crypto scam that some of its members were involved in just four months ago, Faze Clan announced today that the group is on the verge of becoming a public company, which means fans will soon be able to buy shares. Your initial assessment? Oh, $ 1 billion.
The move was announced in a press release Posted today on the group’s websitethat contains exactly the kind of language you expect and hope for, such as:
The FaZe Clan is at the forefront of the global creator economy – an industry focused on creating innovative digital content powered by social media influencers, creators and companies who monetize their content online. With a leading digital content platform developed for and by Gen Z and Millennials, the FaZe clan has built a highly engaged, loyal global fan base of over 350 million on its combined social platforms that can and does compete with established major sports leagues generated more social media interactions than the top eight esports organizations combined.
They estimate this will raise nearly $ 300 million in cash, which they will immediately reinvest in a “global, multi-platform growth strategy that includes content, games, entertainment and consumer products, including potential acquisitions.”
This is big news for a group of guys who have started making Trickshot YouTube videos, but there are also some concerns. First, you must be 18 to buy stocks, which rules out most of Faze’s fan base. Second, while the Faze clan and all of their efforts related to it are popular as hell, this company is by no means worth $ 1 billion right now. As DoTEsports’ Jacob Wolf says, “The fact that FaZe is valued at $ 1 billion as a result of this SPAC deal is wild to me. Feels like hype and not sauce ”. Other large esports teams have only gone public for a fraction of that, and some of them, like TSM, offered far more solid investments (like PC hardware) as part of their offering than Face’s more capricious focus on “content”.
That’s not to say Faze won’t change that. As they said in their announcement, they will be looking at acquisitions, and given their background, one would expect these to have something to do with esports and video games. But these haven’t happened yet, so it sounds optimistic to evaluate them ahead of time at such an astronomical price.
Then there is the nature of the offer. When a company moves from being privately owned to selling shares on the stock exchange, it usually does so as part of an initial public offering or initial public offering, which simply brings the existing private company public and which has long been the most traditional approach. However, in recent years there has been an explosion of SPAC (Special Purpose Acquisition Company) stores, also known as “blank check companies”.
As the Wall Street Journal explained (Emphasis mine):
A SPAC is a mailbox company that raises money and starts trading on an exchange in order to merge with a private company and get it public. The private company will then replace the SPAC on the stock exchange. SPAC deals have exploded over the past year, in part because they allow startups like the FaZe clan to make business forecasts that traditional IPOs don’t allow.
For example, how do you estimate your company to be $ 1 billion? In this case, Faze teams up with “B. Riley Principal 150 Merger Corp “and in 2022 the company will be known as” FaZe Holdings Inc. “after the merger and will be traded on the stock exchange as” FAZE “.
For months there has been growing concern that this onslaught of SPAC deals is a bubble waiting to burst, much like a similar trend – reverse mergers -.did a decade ago, under very similar circumstances. Goldman Sachs boss David Solomon has calledthat the SPAC boom is “not sustainable in the medium term”.
HBR Even mention, that that all from the Financial Times (“SPACs are oven-ready deals that should be left on the shelf”) to SEC Chairman Jay Clayton (the SEC is now Examination of the tightening of the rules for SPAC projections) Have expressed reservations about the boom, not only because of bubble risk, but also because of factors such as SPACs, which do not require the same disclosure requirements as going public, and that the value of most SPAC companies are actually falling until they start trading.
Of course, this doesn’t mean anything to you unless you’re a huge Faze fanatic or considering investing money, but for everyone else, these are just a few things to keep in mind as we watch developments over the coming months .