FaZe Clan Crosses One-Dollar Stock Threshold As Speculation of Delisting Rises
Amid heavy losses and looming doubts, the company’s stock has plummeted from an August high of just over $20 per share.
FaZe Clan will live to see another day on the NASDAQ—at least for now.
For the first time in nearly two weeks, the once self-proclaimed most valuable esports team in the world’s stock closed above the $1 threshold, resetting the clock on a potential deficiency notice from the exchange that would force the company to delist. Just six months after the company went public via a special purpose acquisition corporation (SPAC) and said it was worth $1 billion, its market cap now sits at just under $75 million.
It’s been a tough fall for FaZe, the team that started as a group of teenagers making trickshot videos in some of the earliest days of YouTube but is now one of the most visible representations of esports. The company has had high executive turnover, faced criticism from some of its early members for becoming too corporate and burned through hundreds of millions of dollars in what some have speculated might ultimately lead to its bankruptcy.
Most recently, FaZe’s chief legal officer and general counsel, Tammy Brandt, resigned to join Hollywood mega-agency CAA, and with that, sold a significant position of her shares in the company, per SEC filings. Brandt will remain on with FaZe in an advisory role that will pay her more than $37,500 per month over the next four months.
Brandt is the latest in a slew of executive-level departures, including chief strategy officer Kai Henry who—in an Instagram post in November—suggested that he disagreed with the company’s current direction.
“This mission has never been about money or clout for me,” Henry wrote. “It’s been about my belief system, it’s about empowering the creators/creatives who dictate culture to have a voice and a seat at a table that they have historically been excluded from. I will always put community and those aligned with it above anything else.”
Three other vice president-level employees left the company quietly in the fall, according to esports reporter James Fudge.
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Like Henry, one of FaZe’s early owners became publicly disgruntled. Nordan “Rain” Shat, who became a co-owner of the team before the suits took over, has accused the company of corruption—stating that it has betrayed its values and screwed over the people who built its rabid fanbase.
On the financial side, FaZe had its worst quarter ever in Q3 2022, earning just over $16 million in profit after cost of goods sold and reporting a loss of $154 million in just that quarter alone. At its current burn, its cash on hand is expected to cover only the company’s losses through November 2023, with a regulatory filing painting an even darker picture for the company.
“These conditions have raised substantial doubt about our ability to continue as a going concern, which is dependent upon our ability to generate significant revenue and our ability to raise additional funds by way of our debt and equity financing efforts.” the company wrote in its Q3 quarterly report filed in November.
While the company has continued to sign partnership deals, most recently with Porsche, it is likely to need something by means of outside financing to stay afloat. What that something is remains more uncertain.
Amid heavy losses and looming doubts, the company’s stock plummeted, going from an August high of just over $20 per share to a January low of 71 cents per share. On Jan. 20, the stock fell below one dollar, significantly endangering the team’s future as a publicly-traded company. If it remained under the dollar threshold for 30 consecutive days, the NASDAQ would issue the company a deficiency notice—pushing it to delist.
But just because it went over $1 per share on Thursday doesn’t mean FaZe won’t delist voluntarily.
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Its financing options are limited, but one of its paths to survival could be an acquisition, priced above its current per-share value. While its needs to survive significantly outweigh its market cap, the right owner could bail FaZe out and give it another chance. The money required to do could be billions of dollars, though.
And then there’s the alternative: FaZe is no more.
It seems inconceivable—that a brand so rich with history and so envied among esports executives for its ability to activate to a more casual audience would die. But in a tough economic environment where debt financing is no longer easily available and private investors are burned out on years of promises of esports’ eventual gold mine that never came to fruition, FaZe’s road to survival is long and tough.
The damage FaZe’s demise would inflict on the esports industry, which is already struggling financially, is immense. FaZe, with that young, impressionable audience that has continually forgiven scandal after scandal, should have been able to figure out the perfect line to profitability in what’s becoming a creator-dominated ecosystem. But it hasn’t—the creators have reaped millions from the organization so it maintains its relevancy, and the sales against those creators just haven’t kept up. If FaZe can’t make it work, who can?