One of the biggest gaming groups in the world is going down in a way that has never happened before. This is happening less than a year after it made history by being the first games and gamer lifestyle brand to be listed on the Nasdaq.
When they first showed up on YouTube in 2010, FaZe Clan was a group of gamers known for their Call of Duty videos and trick shots. Since then, FaZe has become one of the most well-known esports companies. It calls itself “a digital-native lifestyle and media platform rooted in gaming and youth culture.”
FaZe Clan has become a mainstay in the gaming world, but the organization has been having a hard time lately. FaZe’s future is becoming less clear as its stock falls and legacy artists criticize the company in public.
So let’s take it apart.
FaZe Clan starts trading stocks
It all started when FaZe said in October 2021 that it was going public. When an organization goes public, it opens up a lot of doors because it can be listed on the stock market. And as FaZe tries to get into gambling, virtual dining, and subscription models, becoming a publicly traded company can help fund new business projects and get the word out.
But in a recent video called “How One Bad Choice Destroyed FaZe (-95% in 6 Months),” commentary YouTuber Jabroney explains how focusing on celebrity support and catering to Gen Z made for an unstable entry into the stock market.
“Going public on the New York Stock Exchange is a hard thing to do,” he says at the start. “You have to pass all these tests, like audited financial statements and following accounting principles…”
But FaZe didn’t do what most people do. Instead, Lee Trink, the CEO of the company, worked with Dan Shribman of the investment firm B. Riley Financial to go public.
About Jabroney’s Video
In the video, Jabroney says, “Dan said there was a popular new way to get your company listed on the stock market without all that boring and time-consuming paperwork.” “It’s called a SPAC, which stands for a special purpose purchase company. B. Riley could make a “shell” company whose only job would be to get money to buy FaZe, and then the two companies would join.
As part of the deal, FaZe Clan raised more than $100 million before it went public. This brought its value up from about $300 million to $1 billion. B. Riley Financial put money into the company, and the FaZe team got big names like Pitbull and Snoop Dogg to join. There was a catch, though.
“[Trink] didn’t actually raise $100,000,000 in cash. Most of these buyers just signed non-binding contracts saying they would buy 10 million shares of FaZe stock at $10 each once the company went public, Jabroney says. “If the owners didn’t pay up… B. Riley would pay the difference to get FaZe going.”
The Fall of FaZe Clan
On July 20, 2022, FaZe Clan made its first appearance on the Nasdaq stock market. Even though the stock prices went up and down at first, FaZe was mostly a success. In August, the highest price for a share was about $20 USD, and the company became “the first esports organization to be worth $1 billion,” according to the Wall Street Journal.
But FaZe Clan soon got into trouble. By the end of September, FaZe’s private investment of $70 million fell through, and 92% of the merger owners got their money back. This put the company in shambles, and shares fell “to less than $5” and “fell even further to $1.78 at one point in November,” Forbes writer Matt Craig writes.
Things have only gotten worse since then.
After the stock market hit a new low on February 16, FaZe allegedly fired about 20% of its employees last month. And just last week, Nasdaq sent FaZe a letter of failure, threatening to take the organization’s shares off the market.
The letter says, “[FaZe] did not meet the $1 minimum bid price requirement to stay listed on The Nasdaq Capital Market.” “The Company has been given an initial time frame of 180 calendar days, or until September 19, 2023, to meet the minimum bid price requirement again.”
In order for a delisting warning to happen, #Faze's stock must close under $1.00 for 30 consecutive days and then would be given 180 days to right the ship so to speak. If under a delisting warning, #Faze could reverse split the stock..or use other methods (3/?)— Kevin Hitt (@Kevin_Hitt) January 20, 2023
Criticizing The Organization
Longtime FaZe Clan creators, including Teeqo and Rain, have begun criticizing the organization, adding fuel to the flames.
The video uploaded by Teeqo on March 13 has received over 2.5 million views. In the video, he asserts that FaZe Clan owners have consistently failed to recompense him, despite the fact that he has only signed a single contract in his twelve years with the organization.
“Throughout the years, we have always been told that talent is the most essential factor, but we disagree… These celebrities you recruit, such as Snoop Dogg and his son, have more money and more shares than many FaZe members, he continues. “In a sense, FaZe is larger than it’s ever been, but it’s also smaller than it’s ever been, with all of these collaborations with really large brands… Comparable to a bandage or silver tape for internal hemorrhaging… Nothing lies behind the FaZe logo support. There is no longer any culture.”
Since then, FaZe Clan has taken to Twitter to respond to the criticism, writing, “We recognize that for too long we haven’t been the FaZe we need to be, but we’re working diligently to change that.”
We know that for too long we haven't been the FaZe we need to be, but we’re working hard towards fixing that.— FaZe Clan (@FaZeClan) March 22, 2023
We hope to have all the OGs sit down together soon, and we don't want to do that without everyone. We’ll do everything in our power to work this out & not let you down.
As a result of all of this, it appears that FaZe Clan is putting creators second to larger partnerships with celebrities and investors. FaZe is disintegrating from the inside out as its founding members speak out against the company’s current direction, and it’s evident that the company’s financial woes aren’t helping matters.
The big question is whether or not the organization will survive. Perhaps the once-dominant FaZe Clan is already on the decline for good.