Breaking down the current financial misery of three Counter-Strike powerhouses
The current global financial landscape seems grim with rising inflation and tanking stock prices across. The esports industry could not escape the shockwave, as a result downsizing and layoffs have become quite common in the scene over the past few months. FaZe, Astralis, and Heroic have been among the worst-affected sides, who have suffered enormous losses because of their public listing.
FaZe Clan is the ultimate online aspirational cool kids club. But recent financial reports show the company may be running out of money…fast
My story for @Forbes:https://t.co/DNAJZaNQ6D
— Matt Craig (@MrMattCraig) December 15, 2022
FaZe have been in rocky financial waters for a while. They secured NASDAQ listing in July 2022 with a Special Purpose Acquisition Company (SPAC) merger, which allowed them to avoid red tape and enter the market faster. The merger was originally valued at $1 billion USD, but when it actually went through, FaZe received a $725 million USD valuation. Both figures were way off the mark.
Such overvaluation seemed a recipe for disaster and it eventually turned out to be the case. Despite a temporary increase in FaZe stock prices, which saw it hit $20.08 in August 2022, the prices suffered a free fall afterward. In March 2023, the trading price for each FaZe share reached $0.40 USD. As of writing, the stock price is still less than $1 USD.
The collapse began in September when news came out that 92% SPAC shareholders cashed out their shares after the company went public. Forbes reported that $71.4 million USD of a $100 million USD PIPE investment aimed towards funding the company’s day-to-day business had defaulted. Now, FaZe only have enough cash to stay afloat till November, 2023.
FaZe’s share value did not rise above the $1 USD threshold since January which made NASDAQ to issue a deficiency notice. If FaZe stock prices don’t stay above $1 USD for 30 business days straight over the next 180 days, NASDAQ can choose to delist the esports giants.
Sports Business Journal reports that FaZe are currently formulating an arrangement that would allow the organization to become a private entity again. They would have to take away all public shares beforehand, and the entire process could set them back in the ballpark of $40-$60 million.
— Sam Molloy (@boocull) January 21, 2023
Astralis are also considering delisting to cut their losses and reinstate themselves as a private company. They are currently undergoing a strategic review to decide their future. Their current share prices are at $0.24 USD (1.63 DKK), which is well below their $1.31 USD (8.95 DKK) IPO. Astralis could also try to merge with another company and sell some of their shares to raise some emergency cash. Even issuing new shares is not out of the cards yet, even though that seems highly unlikely.
Heroic are also struggling to balance their books. They have issued new shares to raise some quick money for funding operations. Their stock price has fallen to $0.075 USD (.80 NOK) from their IPO valuation of $1.85 USD (19.76 NOK). The Norwegian outfit would need $7.5 million USD (80 million NOK) to meet their operational cost till 2025. They currently have around $938,420 (10 million NOK), which will help them pay the bills till this summer.
Lack of lucrative sponsorship deals, increasing debt and failed IPOs have been responsible for putting the finances of these big-shot esports organizations’ finances into jeopardy. With the global financial crisis deepening because of the Ukraine war and other economic and geopolitical instabilities, things could get even worse for them in the coming days.
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