In 2023, financial uncertainty has been a recurring topic in esports. Many esports organizations, including Cloud9, TSM, The Guard, 100 Thieves, and OpTic, have already experienced layoffs, significant downsizing, and sponsorship losses as a result of what has been characterized as a “market correction”.
Organizations have been progressively struggling; most had already been operating with substantial losses prior to the market correction, and three top-level Counter-Strike organizations have not been left out of the mix, impacted by their public market listings.
The most notable of these is FaZe, whose problems started in early 2022. Following a merger with a special purpose acquisition company (SPAC), the American organization went public and joined the NASDAQ stock exchange in July 2022, resulting in an artificially inflated stock market valuation of $725 million.
FaZe had already been accumulating operating losses at such a rapid pace prior to the merger that it was running out of money. Instead of spending months crafting their own initial public offering (IPO) in a desperate bid to raise capital, the organization chose to go public via SPAC, which enabled them to raise necessary capital while avoiding red tape.
Over the course of the year, FaZe’s stock value plummeted from a peak of $20.08 in August 2022 to a recent all-time low of $0.40 on March 20, 2023. According to Forbes, the initially overpriced stock price dropped in September as a result of learning that 74% of the $100 million PIPE investment used to fund operations had defaulted, 92% of SPAC shareholders had chosen to redeem their shares when the company went public, and that the company only had enough cash on hand to cover operations through November 2023.
FaZe’s stock dropped from $14.75 to under $5 in a week, and it has since continued to fall amid increasing uncertainty following the company’s subsequent financial reports. FaZe’s equity fell below $1 for the first time on January 20, 2023, and the organization’s stock fell below that level again just over two weeks later. It has yet to recoup, prompting the NASDAQ stock exchange to issue a deficiency notice:
If a stock’s minimum bid price remains below $1 for 30 consecutive trading days, the exchange sends a notice to the business informing it that it has been granted a “compliance period” of 180 calendar days to raise its share price above $1 for at least ten consecutive days.
FaZe is allegedly contemplating a restructuring that would involve taking the company private again, but doing so would require removing all available shares from the public market. FaZe would require between $40 and $60 million to finish the restructuring process, but they recently reported a $50 million loss.
Heroic, another organization that has recently made news due to a struggle to raise sufficient capital to continue operations, recently chose to issue new shares in order to inject enough money into the business to live until the summer of 2023.
In a shareholder notice, the company informed investors that it would require $7.5 million USD (80 million NOK) to sustain business activities until 2025, with a minimum of $938,420 (10 million NOK) required before summer 2023.
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