FaZe reportedly look to go private after disastrous public listing
It is no secret to those following the news that economy is in a tight spot, as rising interest rates and inflation have investors tightening their belts, especially in esports. The latest victim of changing market conditions appears to be FaZe, who are reportedly looking to walk back their 2022 public listing per Kevin Hitt of the Sports Business Journal newsletter.
For context, back in late 2022 FaZe took their company public with a special purpose acquisition company (SPAC) that valued the esports and content brand at an eye-watering $1 billion. In such a transaction, cash is reserved for the merger that goes through the initial public offering (IPO) process. The entire purpose of a SPAC is to help companies goes public without a regulatory hurdles of a normal IPO.
The $1 billion valuation prior to the SPAC turned heads, and when FaZe actually went public in July 2022, their valuation was adjusted to $725 million. Since the initial public offering, FaZe's stock price has taken a complete nosedive, wiping out around 94% of the company's market cap in less than a year.
This shocking collapse had numerous warning signs as early as April 2022, prior to the SPAC, as FaZe released an updated SEC Form S-4, revising the company's projected and actual profits. Notably, the revised filing noted their earnings before interest, taxes, depreciation, and amortization (EBITDA) was $9.7 million less than projected for 2021.
More recently, Forbes reported in December 2022 that FaZe only had enough cash on hand to last them through November 2023.
Given the IPO and subsequent cratering of the company's stock, which is currently sits at around $0.56 a share, down from the IPO price of $10.00 and from a high of $20.08, FaZe's finances and overall viability are in an incredibly difficult position given current market conditions. Additionally, the culture gaming brand is in danger of being delisted as their stock has been trading below $1.00 for the past 44 consecutive days.
The National Association of Securities Dealers Automated Quotations (NASDAQ), states that stocks that trade below $1.00 for 30 consecutive days will receive a notice of their potential delisting. While FaZe still have 180 days to regain compliance with the applicable requirements, given the current trajectory of their IPO, the entertainment and gaming brand will struggle to reverse current trends.
As a result of this dismal situation, as previously mentioned FaZe are looking to return to private ownership via a restructure that will cost $40 million to $60 million. With FaZe reportedly only having enough cash on hand to just barely survive 2023, and with the current lack of investment in esports, this prospect will be incredibly difficult to realize. Overall, this situation leaves FaZe in an incredibly difficult position as one of the best orgs in CS:GO look towards the future.