FaZe Clan goes public in $725M SPAC deal for creator economy

Digital entertainment and esports brand FaZe Clan began trading on the Nasdaq on Wednesday after completing a SPAC merger in a deal valued at $725 million, a big step for companies in the economy creators are listed on the stock exchange.

FaZe Clan is an online media company with 93 members, made up mostly of esports competitors and content creators, along with a handful of celebrities like Snoop Dogg. FaZe Clan social creators have a combined following of over 500 million across multiple platforms such as YouTube, TikTok, and Twitch. FaZe Clan was also ranked the fourth most valuable esports company by Forbes.

The company began trading on the Nasdaq under the symbol FAZE, and FAZE shares sank on their debut Wednesday morning.

A SPAC, or Special Purpose Acquisition Company, buys an existing private company and brings it to the public markets. SPACs have grown in popularity during the pandemic as an alternative to the traditional initial public offering. However, the SPAC market has dried up, many planned deals remain on hold or have been canceled, and many companies that have gone public using a SPAC merger in recent years have performed extremely poorly, losing more than half of their value in 2022 until the first half. of the year.

Despite current market conditions and the threat of new SPAC regulations, FaZe Clan CEO Lee Trink said he was confident that going public through a SPAC was the right move for his company.

“I understand why other companies have been criticized for going public through the SPAC vehicle. But for us, it really fits,” Trink said.

FaZe Clan was founded in 2010 by a group that started posting gameplay videos on YouTube. The company then grew in terms of membership and engagement, branching out into new vehicles such as esports where players participate in video game competitions. Trink, who previously served as president of Capitol Records, joined the company in 2018, seeing opportunity in a brand focused on younger audiences.

“We believe we’re the first Gen Z native brand to go public; we’re definitely the first creator-based brand to go public,” Trink said.

FaZe Clan announced the SPAC merger plan last October, marking the deal at $1 billion. Nine months later, the deal is now worth $725 million.

“The original plan was to go public in the first quarter of this year. Obviously that didn’t happen,” said Tobias Seck, business analyst at The Esports Observer.

In March, FaZe Clan received a $20 million bridge loan from B. Riley Principal Commercial Capital, the special purpose acquisition company it is merging with.

“It seems like their best attempt to get capital, especially in the rather tough economic times we’re going through right now,” Seck said. “It’s obviously still nascent, and most organizations are still trying to figure out how to make money,” he added.

In an amended June filing related to the deal, the company said estimated 2021 revenue of around $50 million and forecast revenue of $90 million in 2022, but a loss in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) larger than it had previously expected, by $19 million.

FaZe Clan plans to attract more creators and help them grow their own community, an alternative to relying on ad revenue from existing social media brands.

“FaZe Clan will fund the investments and we will create the product and own more of the upside. This is the future of the creator economy,” Trink said.

Trink predicts that esports activity will make up a smaller portion of FaZe Clan’s revenue going forward. Upcoming projects may include expanding a gambling business with DraftKings, a delivery-only dining option similar to influencer MrBeast’s Burger, and play-to-win games that allow streamers to be paid.

FaZe Clan is expected to raise nearly $60 million from the SPAC deal, according to market sources familiar with the deal, with current shareholders continuing to own 77% of the company after its IPO.

The creator economy is a growing force in the marketplace. The global market size is estimated at more than $13 billion, according to Statista, and is mostly concentrated among a younger generation.

FaZe Clan prides itself on capturing a younger audience, reporting that 80% is comprised of 13-34 year olds.

“Gen Z isn’t about your parents’ brands. Gen Z wants connectedness and closeness,” Trink said. “We are the translators and what we know is how to reach that audience,” he added.

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