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Esports company FaZe Clan to go public

By Monte Stewart


Updated

FaZe Clan
FaZe Clan - Photo: Shutterstock

American esports company FaZe Clan intends to go public through a merger with a blank cheque firm.

Los Angeles, California-based FaZe is aiming for a $1bn valuation by combining with a special purpose acquisition company (SPAC) backed by investment advisory group B Riley Financial, according to a news release.

Faze plans to expand its digital youth lifestyle and media platform, which includes the company’s esports business, merchandise sales and social media content.

The proposed IPO plan comes as investors are showing a strong appetite for esports and sports betting properties.

Blank cheque companies – also known as SPACs – exist solely for the purpose to taking another firm public through a merger, acquisition, or other transaction vehicle. SPACs go public first before merging with target firms.

Proceeds of $291m expected

FaZe expects to generate proceeds of $291m, including $175m from the SPAC’s IPO proceeds held in trust, presuming no redemptions and $118m in private investment in public equity investments.

B Riley Principal Merger (BRPM) is expected to own 17.5% of FaZe, while existing shareholders will retain 67.9%, according to a separate news release.

Fanbase of 350 million

FaZe said it has a social media fanbase of 350 million people.

“We believe FaZe Clan is becoming the voice of youth culture, a brand that sits at the nexus of content, gaming, entertainment and lifestyle in the digital-native world,” said FaZe CEO Lee Trink in the news release. “This transaction will provide us capital and access to the public markets, which will help us accelerate the expansion of our multi-platform and monetisation strategy.”

CEO calls proposed deal “a pivotal moment”

On a webcast with analysts, Trink called the proposed merger “a pivotal moment in the ever-evolving media landscape.” Faze Clan believes that its revenue – generated through content, merchandise and consumer goods segments, sponsorships, and esports teams – could grow 10 to 200 times above current levels.

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“FaZe is well-positioned to capitalise on the massive global growth and scale in both gaming and video streaming,” said Trink during the webcast.

SPAC’s and backer’s prices rise

After the proposed IPO was announced, BRPM saw its share price spike, closing up 14.89%, or $1.45, on the Nasdaq Capital Market.

Meanwhile, B. Riley Financial’s share price finished the day up 3.38%, or $2.11, at $64.47 on the Nasdaq Global Market.

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The difference between stocks and CFDs:

The main difference between CFD trading and stock trading is that you don’t own the underlying  stock when you trade on an individual stock CFD.

With CFDs, you never actually buy or sell the underlying asset that you’ve chosen to trade. You  can still benefit if the market moves in your favour, or make a loss if it moves against you.

However, with traditional stock trading you enter a contract to exchange the legal ownership of the individual shares for money, and you own this equity.

CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional stock trading, you buy the shares for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks.

CFDs attract overnight costs to hold the trades, (unless you use 1-1 leverage) which makes them more suited to short-term trading opportunities. Stocks are more normally bought and held for longer. You might also pay a stockbroker commission or fees when buying and selling stocks.

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