Why Does FaZe Clan Think It’s Worth $1 Billion?

The gaming clan, which has inscrutable business lines, is using an inscrutable financial tool in apparent hopes of becoming a meme stock. Sure, why not?
October 26, 2021, 5:13pm
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Source: FIFA via Getty Images

FaZe Clan, the esports and gaming influencer group, announced plans on Monday to become “the only digitally native, youth-focused lifestyle and media platforms publicly traded on a U.S. national exchange,” thanks to one of the hottest and most eyebrow-raising instruments in modern finance: the special purpose acquisition company, or SPAC. The deal will value the company at around $1 billion, according to a release. Once the whole thing is completed, the company will adopt the ticker symbol “FAZE” on the NASDAQ, and the company will maybe inevitably try to hype its way to the moon. 

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“We’re going to be on Wall Street guys !” one of them says in a video announcing the news to fans. 

The expectation is that FaZe Clan could become something of a meme stock, exploding well beyond the nuts and bolts of its true economic value, essentially because kids like it and kids buy meme stocks.  (The release says “80% of its audience [is] between the ages of 13-34,” which is the Investor Talk for “We Are Cool.”) FaZe Clan claims to have a “loyal global fan base of over 350 million across its combined social platforms that rivals established major sports leagues,” which would make it just the most recent in a long line of legendary media-adjacent companies (this one included) to lump together dubious figures from various disparate sites to improve their pitch to potential investors. Famous people like FaZe Clan too, like LeBron James’ kid. And Offset. And Ben Simmons.

“I feel like FaZe Clan is a home away from home and I’m very trusting in what the organization is doing,” said Simmons, apparently unironically, according to the company’s website. 

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So, what is it? According to the company’s CEO, Lee Trink, it’s something like “Dallas Cowboys meets Supreme meets MTV.” According to the New York Times, it’s an “influencer marketing agency, e-commerce company and e-sports team all in one.” According to its own release, FaZe Clan is “a digital-native lifestyle and media platform rooted in gaming and youth culture, reimagining traditional entertainment for the next generation.” Sure! Essentially, it has good esports teams, sells merch, creates ads for companies like Burger King, and produces what I suppose has to be described as content. FaZe Clan’s dozens of influencers all live at a California gamer compound and do viral internet stuff while playing video games. People seem to like to watch—I’m old!—and eyeballs and interest in the creator economy is everything, or at least a lot.  

If nothing else, it all involves some incredible marketing copy.

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"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,” said Lee Trink, the chief executive officer of FaZe Clan and surely the only person to serve as both Kid Rock’s manager and an Assistant District Attorney in Brooklyn.

“Welcome to the future,” the Faze Clan’s official website tells visitors. (The future involves Faze Clan pumpkin stencils and a lot of hoodies.)

Sounds like a promising business! Is it a $1 billion business? That depends on where you expect them to go from here, which is why the SPAC route makes sense for a company like FaZe Clan. Trink told the New York Times that the company “didn’t spend that much time really ideating on a traditional I.P.O. strategy.” Part of the reason was that companies that take that route cannot legally predict where they’ll go from here; they can only sell themselves on who they are right now. (Motherboard reached out to the company to learn more but didn’t immediately hear back.)

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And right now, FaZe Clan is an unprofitable enterprise that only banked $38 million in revenue last year. With a SPAC, FaZe Clan can tell us just how incredible they’ll be in five years, and 10 years, and 20, which could get Robinhood investors excited (and convince them to throw down for a couple shares). Is there maybe a societal issue with companies pumping themselves up to retail investors? Why do the IPO rules exist in the first place? These are some questions worth pondering. 

But for FaZe Clan, you can see why the SPAC news looks so appealing. Again, they are cool, which can be just as important, at least for a little while, as a company's quarterly finances when it comes to a company stock shooting up (and—please remember!—falling back down). Matt Levine, resident smart finance man over at Bloomberg, explained last week how the SPAC craze has made it possible for even “pre-product, pre-revenue companies” to get huge valuations on hype alone.  

“[I]f you launch a company with the goal of making it profitable, you have to, like, have a workable business plan and execute on it and deal with a million different operational complexities,” Levine wrote. “If you launch a company with the goal of selling a lot of stock, you have to get people to trust you and give you their money. There is some overlap between those things! But they are different things!”

And look, as with any digital-native lifestyle and media platform rooted in gaming and youth culture, the company will struggle occasionally with growing pains, like when the occasional member pumps up an alt coin called Save The Children to his 800,000-plus followers on Twitter before it crashes down to earth. (The company took swift action and apologized). The company has also had issues with members using racial slurs on streams (FaZe Dubs, suspended indefinitely); being extremely young (H1ghsky1, allegedly lied about age); and wrecking Vegas hotel rooms (FaZe Banks, $30,000 in damages, good times: priceless). 

Now: Say what you will, but FaZe Clan is much further along than, say, Donald Trump’s Big Theoretical Facebook Competitor. FaZe Clan has revenue, a team winning gaming championships, and a cool-looking compound. But the main similarity might revolve around the fact that both entities’ value is at least a tiny bit tied to their cult status. And in the case of Donald Trump’s forthcoming media company, Levine argued that you don’t buy the stock because of “optimistic cash-flow forecasts” as much as because “you like Donald Trump.” (“It’s just vibes,” he added.) You have to see at least a little bit of this here. I mean, Pitbull is an investor! 

Most of all, FaZe Clan (and life) is about community, which the company tried to emphasize in a Monday video that celebrated the fact that a small number of people are potentially about to get very rich. In the video, they said, this was all possible thanks to the fans. Conveniently enough, they will soon be able to be investors too.