Faze Clan, the youth-focused "gaming, lifestyle and media platform," has announced plans to go public through a merger with a "special purpose acquisition company" that will give it an "implied equity valuation" of—get ready for it—approximately $1 billion.
That wild figure arises primarily from the way that Faze is going public. Special purpose acquisition companies are basically shell corporations that exist solely for the purpose of acquiring another company. These SPAC deals, as they're known, are vehicles that enable private companies like Faze to go public without having to go through the slower and more regulated process of an initial public offering. Once the merger between the two companies is complete, the formerly private company takes the place of the SPAC on the exchange listing.
For you, the fans.Our biggest announcement to date: FaZe Clan is going to become a publicly traded company. https://t.co/HaHJtFIglW pic.twitter.com/YNYLpvVIRoOctober 25, 2021
"The team that came from making trick shots is now going public. How crazy is this?" Faze said on Twitter. "This isn't just a big moment for us in Faze Clan, it's a huge moment for everybody who grew up on the internet with us. We've grown up with you guys. This is really something we've all created together. This is your company, your brand. Without you guys, we would never be here."
Of course, it's not "your" company, but rather a publicly traded company belonging, and responsible, to shareholders. The actual announcement of the proposed merger and public listing is less hype, but more accurate.
"Through the proposed business combination, Faze Clan is positioned to become one of the only digitally native, youth-focused lifestyle and media platforms publicly traded on a U.S. national exchange," it says. "Upon completion of the proposed Business Combination, BRPM will change its name to 'Faze Holdings Inc.' The combined company’s common stock is expected to be listed on NASDAQ under the new ticker symbol FAZE."
According to the Wall Street Journal, this type of deal has become very popular over the past year in part because it allows companies to make business projections—like, for instance, a $1 billion valuation—in ways that aren't allowed in conventional IPOs. Global accounting firm KPMG has a more detailed breakdown of the difference between the two, if you're interested in the details.
It's complicated, but the short version is that SPAC deals are faster, looser, and potentially more lucrative (at least for initial investors) than IPOs, but also riskier—and while Faze Clan is tremendously popular, that $1 billion number isn't quite carved in stone.
Faze's front-facing announcements, like the tweet above, are aimed at a core fan base that's largely too young to actually take part in the new venture. But the company hopes that its "key relationships with [that] coveted demographic" will help it appeal to more conventional investors.
"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," Faze CEO Lee Trink said. "This transaction will provide us capital and access to the public markets, which will help us accelerate the expansion of our multi-platform and monetization strategy."
The merger between Faze and BRPM is expected to be completed in the first quarter of 2022. Interestingly, a Reuters report from September says the US Securities and Exchange Commission is reportedly looking to crack down on SPAC deals with new requirements that could cause most of them to fall below NASDAQ's minimum listing requirements.
