The eSports clan FaZe has its roots on YouTube and in shooters like Call of Duty or Counter-Strike. However, since its founding in 2010, the US organization has grown into a global gaming brand. FaZe is the largest eSports clan on social media. But the idea of going public proves to be difficult. They wanted to position themselves as a cool media brand for Gen Z, but 8 months later, the stock has fallen by 96%. An expert in eSports says: This lack of success makes it harder for everyone in gaming to get money..
What is the FaZe Clan? It is an eSports organization from Los Angeles that must be described as controversial. On one hand, FaZe is incredibly successful on social media:
- They have nearly 5.8 million followers on Twitter.
- 11.6 million on Instagram.
- 8.6 million on YouTube.
They are by far the largest e-sports team in the Western world.
On the other hand, FaZe has repeatedly been involved in controversies:
- Their Fortnite star Tfue complained about being trapped in a “gag contract”.
- One of the founders of FaZe was involved in controversial skin betting in CS:GO over the island of Antigua.
- There has been ongoing disputes over dubious deals where members of the FaZe clan promoted products to their fans that were not acceptable, including a crypto scam.
FaZe is the “Bad Boy – Old School” brand among gaming organizations. They rely less on successful teams and more on YouTubers, entertainment, and personalities.
Legendary is the story of “FaZe Jarvis”, who was banned from Fortnite for using an aimbot, purely for fun, of course.
40 times more followers on YouTube than the largest sports brand in the USA
That was the idea behind the IPO: The company went public on NASDAQ in July 2022. They called for a valuation of $725 million. As Yahoo Finance reports, the company’s idea was:
- FaZe is a “media company” that is close to “Gen Z” – 80% of fans are between 13 and 34 years old.
- Through the company, businesses could reach a brand new target audience of customers that traditional sports could not reach.
- The Dallas Cowboys, the largest sports brand in the USA, have only 281,000 followers on YouTube – FaZe has 8.6 million (via Yahoo).
8 months of FaZe on the stock market: From $10 to $25 up to $0.40 down
How has it really gone? The stock has performed quite horrible for long-term investors since the IPO in July 2022:
- Whoever invested $1,000 in the stock in July 2022 now has shares worth $40 left.
- Because the value of the stock has collapsed from about $10 to $0.40 cents.
The stock briefly reached a peak value of almost $25 in August 2022. The investment could more than double its value. In August, FaZe presented strong growth figures, increasing its sales by 22% compared to the previous year.
But since September 26, there has been a steep decline in share prices that has now cost the stock almost 96% of its value.
Lack of profit, self-inflicted problems, and the eSports winter push the stock down
What caused the stock price drop? The simple analysis is: The company is not profitable but is losing money every month, despite being able to increase revenue.
Therefore, investors fear that FaZe could come to the point of raising money through a new share issuance. When more shares of a company are issued (a so-called offering), the value of each share decreases, which is referred to as “dilution” – investors usually fear this.
Overall, the stock climate has been poor in recent months anyway. The war in Ukraine, rising interest rates, inflation, and the aftermath of COVID have affected investor sentiment. The stock market refers to a “bear market,” and some believe that a recession is inevitable.
Moreover, the eSports hype that existed a few years ago seems to be fading significantly. Around 2016, some believed “eSports would be the next poker,” a global hype. We have moved away from that now – also because prestige projects like the “Overwatch eSports League” or the Fortnite World Cup have not developed as well as believed a few years ago.
Furthermore, FaZe has self-inflicted problems: They originally wanted to hold a massive reality show in spring 2022, a sort of “Big Brother,” but COVID ruined the entire action.
Everyone in gaming now has a harder time getting money
This is what an eSports expert says: eSports expert and “100 Thieves” head Matthew “Nadeshot” Haag (30) has commented on the crisis.
100 Thieves is taking a similar course to 100 Thieves. It doesn’t focus as much on sporting success, but rather on influencers and stylish clothing. As a direct competitor, one might think that Nadeshot is happy about the decline of FaZe’s stock, but the opposite is true.
He says this is a huge problem for the entire eSports industry:
Let me be clear and very clear: You can say that this is their fault, and they tricked us by jumping in, but their lack of success is a terrible thing for the entire industry.
Outside investors looking at the gaming business and wanting to get involved would want nothing to do with the gaming industry, given the massive loss at FaZe. They wouldn’t even want to touch it with a ten-foot pole.
While this is a specific situation for FaZe, the whole thing makes it harder for everyone in gaming to talk to investors about money, the long-time eSports veteran Nadeshot says.
Overall, the situation in eSports is currently critical. Some large established eSports companies are closing down, and one speaks of a “eSports winter”:
