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FaZe Clan's stock run ends in $17 million acquisition, down 98.5% from $1.2 billion peak valuation

FaZe up? More like FaZe down. A lot.

Asif Khan

October 20, 2023 1:00 PM

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FaZe clan's wild ride as a publicly-traded company has come to a merciful end following GameSquare's $17 million acquistion of the beleagered esports organization. The deal values the company at a 98.5% discount to its all-time high market capitalization of $1.2 billion. Not very FaZe up, bro.

Check out the statement from GameSquare CEO Justin Kenna, new FaZe CEO Richard Bengtson, and FaZe Interim CEO Christopher Pachler :

"The gaming community represents one of the largest and most engaged segments of the attention economy," stated Justin Kenna, CEO of GameSquare. "The acquisition of one of the biggest names in gaming serves as a perfect illustration of how we have built a powerful infrastructure with expansive scale that we can use to leverage the full spectrum of resources within the GameSquare ecosystem. We are also thrilled to welcome back the founders of FaZe Clan and their fans, one of the most deeply engaged communities born on the internet."

"I'm confident that with Tommy, Apex and me back in charge of the brand, FaZe Clan will get back to where it was in its peak years," stated Richard "FaZe Banks" Bengtson, who will take on the CEO role of FaZe Clan after the transaction closes. "We grew up on the internet and understand this brand better than anyone ever could. We are grateful to have found a partner in GameSquare who sees that value in us and can help execute our vision. We're going to produce first, talk later."

"Joining forces with GameSquare creates greater scale and exciting opportunities in the emerging market for gaming and youth culture," stated Christoph Pachler, Interim CEO of FaZe Clan. "The strength of the FaZe brand and GameSquare's infrastructure are a powerful combination that will enable FaZe shareholders to benefit from the combined company's long-term value creation potential."

The new combination with GameSquare will feature a shakeup of FaZe Clan's leadership with Richard "FaZe Banks" Bengtson as CEO, Thomas "FaZe Temperrr" Oliveira as President, and Yousef "FaZe Apex" Abdelfattah as COO. 

GameSquare is certainly picking up FaZe Holdings for less than most investors who bought shares of the SPAC deal. FaZe Holdings Inc. peaked at a $1.2 billion valuation in September 2022 following its small float sliver deal. The extremely small amount of shares created the appearance of scarcity and high short selling borrowing costs. UItimately, FaZe dumped more shares onto the market with a secondary offering last year and the stock began its death spiral that ended with the company trading for less than 25 cents.

As I said when I stupidly purchased some shares last year, the only sure way to win was to not play FaZe stock on either side of the trade. There are plenty of failed SPAC deals that are piling up in 2023, and the whole SPAC environment speaks to the shady nature of avoiding the scrutiny that traditional IPOs face. 

Sentiment surrounding esports organizations has shifted recently, with Overwatch League's future in flux, and many venture capitalists now falling over each other to shove money into AI plays. This era will be characterized by rolling bubbles like the VR gold rush, crypto/blockchain obsessions, NFT nonsense, metaverse pivots, and now in esports. 

FaZe Clan did right by their founders by cashing in on the esports hype with the SPAC and well-timed insider sales, but shareholders who were duped into buying the pubicly-traded stock are almost certainly down on their investments. Hopefully the new company has a brainstorming session for a new slogan, because "FaZe Up" just doesn't seem to be on brand anymore. It's never fun to be exit liquidity for horrible boards of directors and terrible management, but hopefully FaZe shareholders learned a valuable lesson in the shell game that is investing in public markets in 2023.

This article is only meant for educational purposes, and should not be taken as investment advice. Please consider your own investment time horizon, risk tolerance, and consult with a financial advisor before acting on this information.

Full Disclosure:

At the time of this article, Shacknews primary shareholder Asif A. Khan, his family members, or his company Virtue LLC had the following positions:

Long FaZe Holdings via FAZE shares

Long FaZe Holdings via FAZE call options (they will expire worthless)

Asif Khan

CEO/EIC/EIEIO

Asif Khan is the CEO, EIC, and majority shareholder of Shacknews. He began his career in video game journalism as a freelancer in 2001 for Tendobox.com. Asif is a CPA and was formerly an investment adviser representative. After much success in his own personal investments, he retired from his day job in financial services and is currently focused on new private investments. His favorite PC game of all time is Duke Nukem 3D, and he is an unapologetic fan of most things Nintendo. Asif first frequented the Shack when it was sCary's Shugashack to find all things Quake. When he is not immersed in investments or gaming he is a purveyor of fine electronic music. Asif also has an irrational love of Cleveland sports.