Esports giant FaZe Clan has agreed to be purchased by rival GameSquare in an all-stock deal that values FaZe at about 21 cents a share, according to an announcement from the two companies Friday. Just 14 months ago, FaZe traded at $24 a share and was valued at more than $1 billion. The GameSquare merger values FaZe at $18.5 million, based on announced terms.
“We grew up on the internet and understand this brand better than anyone ever could,” Richard “FaZe Banks” Bengtson, one of FaZe’s founders, said in a statement. “We are grateful to have found a partner in GameSquare who sees that value in us and can help execute our vision. We’re going to produce first, talk later.”
Under terms of the deal, FaZe Clan shareholders will receive 0.13091 GameSquare shares for every share of FaZe they own, equal to a little more than 21 cents a share. The deal has been approved by both companies’ boards and will close before the end of 2023. FaZe will be a subsidiary of GameSquare, with Bengston leading the division’s CEO.
The consolidation of the two companies will create the largest business in esports, at least in terms of social media reach, with 1 billion followers. Based on 2022 results, the combined companies generate $188 million in revenue. GameSquare is 47% controlled by Dallas Cowboys owner Jerry Jones, who acquired his stake in 2021 through the sale of a Dallas esports startup he owned.
The sale of FaZe Clan marks a sharp fall from grace in Wall Street’s eyes. The esports group went public by merger with a special purpose acquisition company that valued the business at more than $1 billion. The company struggled with departures of key executives and the failure to live up to the projections it gave investors. Before becoming publicly traded, FaZe Clan pitched investors on the ability to convert its massive social media following into paying customers, predicting it would generate $91 million in sales for 2022 with massive advances in subsequent years. FaZe ended up well short in 2022, at $70 million sales, with expectations for future growth much diminished.
As investors soured on FaZe Clan, so did some of its biggest celebrity backers, such as rapper Snoop Dogg. He left the FaZe Clan board a little over a year after announcing he was part of the Clan during the 2022 Super Bowl. Snoop Dogg received stock awards valued at more than $7 million during the height of enthusiasm for the company, but the celebrity probably collected just $53,000 in compensation by the time he left.
The merger with GameSquare may not be a cure-all for esports, at least in the investing world. GameSquare shares have surrendered more than 78% of their value since March, closing Thursday’s trading on the Nasdaq at $1.81 a share. Its shares were down slightly Friday morning, while FaZe’s jumped to about the purchase price equivalent of 21 cents.
