The Best E-Sports Play Will Hit the Market Soon

Gaming Stocks, SPAC

There is no doubt that social networks have completely changed our society.

A few generations ago, young people wanted to become teachers, doctors, policemen, or some other type of professional. But no longer: a 2019 survey conducted by Morning Consult showed that more than half of the 2,000 Gen Z and millennials surveyed want to be influencers.

Video games have also changed society. They’ve become intertwined with video streaming over the past decade, with Google’s YouTube and Amazon’s Twitch growing so popular among gamers that they now exert influence over the entire industry.

Twitch and other video game live-streaming channels allow gamers to stream themselves playing games live—and these broadcasts are enormously popular. According to a recent Deloitte study, 45% of frequent gamers watch others stream gameplay. In effect, these channels create tight-knit communities around streamers that occupy the space in many young people’s lives that TV once did.

This is good news for the few top streamers on Twitch, who can earn millions of dollars a year.

And it’s also great news for the video gaming industry in general. Take the video game Fortnite, for example,fromEpicGames.

It is so wildly popular that it’s become more than just a game. Today, it’s a social media platform in its own right. It influences pop culture among teenagers—everything from clothing to dances.

And of course, Fortnite is also at the forefront of e-sports. In 2020, Epic Games reported that Fortnite had 350 million registered accounts across the globe. Even though there are likely many duplicate accounts, the number of people on Fortnite is larger than the population of most countries. The Fortnite World Cup in 2019 drew 2.3 million concurrent viewers on YouTube and Twitch, according to Epic.

So how can you, as an investor, play this booming industry?

After all, Epic Games is still private and both Google and Amazon are not pure gaming companies.

Have no fear. A company in this space is going public soon, via the route of a a special purpose acquisition company, or SPAC.

FaZe Clan

The company is FaZe Clan, which is one of the larger e-sports teams that also doubles as a lifestyle brand.

On October 25, FaZe Clan announced it entered into a merger agreement with, B. Riley Principal 150 Merger Corp. (BRPM), a SPAC. The proposed deal implies an equity value of about $1 billion for the combined company, which would will position FaZe Clan, as the press release described, as: “…one of the only digitally native, youth-focused lifestyle and media platforms publicly traded on a U.S. national exchange.”

Chart showing the BRPM stock movement.

After the deal is completed, the stock symbol will change from BRPM to FAZE.

The press release went on to call FaZe Clan “the voice of youth culture,” adding that it’s “at the forefront of the global creator economy—an industry centered around innovative digital content development fueled by social media influencers, creators and businesses who monetize their content online.”

FaZe Clan does have a highly engaged, loyal global fan base of over 350 million Gen Z and millennial users (80% of its base is between the ages of 13 and 34). And the company has ten competitive e-sports teams that have won 30 championships worldwide, as well as 85 influencers.

The company, which also has a very popular online store, has been signing advertising deals with the likes of Burger King, McDonald’s, Doritos and DC Comics.

The New York Times described the company this way: “Founded in 2010, FaZe Clan is an influencer marketing agency, e-commerce company and e-sports team all in one. (The company’s chief executive, Lee Trink, once described it as: “Dallas Cowboys meets Supreme meets MTV.”)

What the Future Holds

I do believe that, in effect, FaZe Clan has discovered the ‘secret recipe’ to reach a coveted demographic that has always been difficult to reach for traditional media companies and advertisers.

FaZe Clan is not yet profitable; however, it did bring in about $38 million in revenue last year and expects to report more than $50 million in revenues this year.

The price of the B Riley SPAC—BRPM—did move from its low of $9.62 to above $15 after the deal was announced. But, as has been typical lately with all SPAC deals, it quickly gave back most of the gain. As I write this, BRPM is trading at $10.85.

Consider any price under $11 a gift from the market gods and use the opportunity to purchase this new-generation firm, FaZe, which is perfectly tied (like no other company so far) to a much-coveted demographic base.