MarketsJun 29, 2022
FaZe Clan guns for a $1B valuation as esports stocks struggle in the public markets
Competitive Entertainment
Victor Lei
Discover
Sports or video games as a career? Here’s a stat for you. 30.6M people tuned in to the League of Legends World Championship, while 9.9M people tuned in to the 2021 NBA Finals.
With more than a third of the world gaming, a career in gaming is no joke. But we can’t say the same about esports stocks…
Esports stocks went through a massive correction in the past year after a record jump in interest during COVID.
But just like other sports organizations, sponsorships keep the bills paid: more eyeballs, more money. “It’s a world where the most entertaining player has a more lucrative career than the best player” — Per FaZe Clan’s CEO.
Esports companies have high operating costs with astonishingly bad numbers. In the past 12 months:
The list of highly unprofitable esports companies goes on and on — all low market cap penny stocks.
FaZe Clan is the fourth most valuable esports organization, with 10+ esports teams competing in games like Call of Duty and Fortnite.
Last week, their board approved a proposal to go public by merging with SPAC B. Riley Principal 150 Merger Corp (NASDAQ:BRPM):
The deal is expected to close in July, but there’s really nothing to be excited about. Per esports journalist Jacob Wolf (Digiday), esports companies are trying to value themselves like big tech companies.
At a $1B valuation, FaZe would trade at an expensive 20x sales multiple — a recipe for portfolio disaster.
Brands turned to esports companies to reach a growing audience of gamers. But the sponsorships that support esports companies are demanding proven results on their marketing investments.
And investors are also unhappy with eSport stocks…
Esports is an emerging industry with much to figure out.
