FaZe Clan goes public – $1 Billion valuation explained

FaZe Clan has risen over the years to become one of the biggest and most well-known epsorts teams. They’ve seen success in a good number of titles and built a healthy roster of content creators. Those who own FaZe are currently hoping these achievements are enough to justify a pretty high valuation for the company.

It’s been announced that FaZe Clan is going public, but they’re taking a bit of a different route. They’re following in the footsteps of TSM, but there are some important distinctions to keep in mind about how this is going to work. There’s a high valuation for FaZe’s initial price, and some things to keep in mind about how that price was found.

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FaZe Clan Goes Public

FaZe Clan is becoming a publicly traded company. If you’re relatively new to investing in esports, then this could seem like an attractive opportunity. FaZe Clan is one of the biggest esports teams, and a public offering allows others invest in them. A private traded company is one that is owned by private individuals. That can be the founders of the company or those who have made private early investment. However, a publicly traded company has stock issued. This means people can purchase a share of the company, to own a specific portion.

When a company like FaZe Clan goes public, it means they move from being privately owned to being publicly traded. Usually this means they issue stock and decide to sell a certain amount of it publicly. This allows the company to raise revenue, which can be reinvested in order to increase the value of the company for the new shareholders.

This is basically how everything works, but things are a bit different with FaZe Clan going public. They’re using slightly unconventional ways to find their valuations.

FaZe’s Valuation

One of the first things that jumps out about this particular public offering is the valuation of the stock. FaZe Clan is launching with a valuation of $1 billion dollars. This is a high valuation for an esports team. The big price tag for the value of the company, and the reason behind it can shed some light on how FaZe Clan going public is progressing.

FaZe aren’t using a traditional IPO to go public, but a SPAC.

An IPO is the standard way of taking a company public. Here, a set number of shares are issued and the issuer completes a valuation which reflects the potential of the company. This isn’t a perfect way to do it and IPOs are often criticised for their pricing. However, in general it puts the value of a company down to a third party to decide. FaZe Clan is using a SPAC to go public. This means that they’re establishing a shell firm which will trade on a stock exchange and then merge with FaZe Clan. This allows them to go public at a price tag they’ve had more input in, rather than it being a more objective value.

Why Is FaZe Valued at $1 Billion?

If you’re relatively new to investing, then the FaZe Clan valuation might seem pretty normal. However, the method they’ve gone through to list at that price instead of an IPO should sound alarm bells. This valuation of FaZe Clan is based on the assumption of incredible growth for the team in the future. This isn’t uncommon in today’s stock market, where values are historically inflated. However, it is worrying and reflects poorly on FaZe clAN.

Early investors should be wary of this high valuation, and consider waiting until FaZe Clan’s stock price more accurately reflects valuation rather than the number they chose to raise funds at.