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Love Esports? This Esports Company Is Going Public in a $1 Billion Deal

By Jon Quast, Clay Bruning, and Sanmeet Deo – Nov 6, 2021 at 7:46AM

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An investment in FaZe Clan is a bet on changing preferences when it comes to entertainment.

On Oct. 25, special purpose acquisition company (SPAC) B. Riley Principal 150 Merger Corp (BRPM 12.74%) announced it was merging with esports company FaZe Clan to bring it to the public markets. This makes the first time an esports team will be a public company and the $1 billion valuation is certainly head-turning.

In this video from Motley Fool Backstage Pass, recorded on Oct. 25, Fool analyst Clay Bruning discusses the deal with fellow analyst Sanmeet Deo and contributor Jon Quast. While they still have a lot to learn about FaZe Clan itself, they note the deal represents just how far video games and esports have come. 

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Clay Bruning: I guess the one other thing was I think the news actually came out today or maybe it was last night about the esports team FaZe is coming public in a SPAC deal that's going to value them at $1 billion dollars. This is the first high-profile esports team or brand, if you will, that's becoming public, and it's going to be really interesting to see how well or maybe not so well the reception for this team is moving forward.

Sanmeet Deo: Was this the FaZe Clan you're talking about?

Bruning: Yeah, exactly. I don't follow the space too familiar, but to me, this is one of the few teams or brands I guess I'm actually very familiar with. I think they've had some high-profile investors in the past. I want to say maybe Drake invested in them a couple of years ago. I'm not totally sure on that, but definitely a high-profile team or I guess they call it a clan.

But yeah, super interesting to see how this will be received in the public markets, especially valued at $1 billion dollars.

Deo: It's like a platform where teams and organizations and leagues can host esport events? Is that how it works?

Bruning: It's like a esports team.

Deo: OK.

Bruning: I don't know how many people they have, but then the team competes in events. They also are big on streaming, I believe. Then they also have, I believe, clothing brands, a media platform. They've grown from just being an esports team to being a brand, to expand outside of just the gamers platform. Whether it's streaming or having that lifestyle brand with sweatshirts and shirts and stuff like that.

I think they're specifically planning to use the proceeds to increase digitization and youth lifestyle and media specifically. I haven't read up too much about it, but like I said, I think they're valued about $1 billion dollars.

It will be interesting to see. I haven't dug into the financials. What these financials look like, what their reach is both on social media, streaming, what their projections are over the long term, specifically for their team, but also for the esports industry as a whole.

I'd be curious if they project out what they expect to win over the next couple of years and strutting their stuff as best-in-brand for a gaming team I guess.

Deo: That's exciting for the industry that a team is coming public and once one breaks open the seal, we'll start seeing more of them. It'll be interesting to see how more might come public and what their financials look like. Probably gives a better look at the industry and how it actually will work or can work in the future.

Jon Quast: This is not something that I'm familiar with at all and [laughs] it sounds bizarre to me. As I understand that they got their start live streaming on Twitch doing trick shots on video games, and that's just almost like Dude Perfect on YouTube or something, [laughs] but the video game version.

I saw somebody liken the company to Barstool Sports in a way, and the comparison there was, you have this Barstool platform that is just a grassroots fan company with sports, and you have the same thing going on here with, the name is escaping me, FaZe. What's it called?

Bruning: FaZe Clan.

Quast: FaZe Clan, yes. They have the same flavor going on here with FaZe Clan that this is a grassroots. These are just guys playing video games and they've turned it into a platform, they're calling it a lifestyle brand, but they found different ways to monetize their love of video games is probably the simplest way that we can talk about this.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sanmeet Deo owns shares of Amazon. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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