FaZe Clan faces financial troubles and risks going bankrupt in 2023

According to the authoritative Forbes magazine, the North American esports organization FaZe Clan is experiencing huge financial problems, which may leave it without a livelihood as early as 2023. To solve their problems, the club requires large investments, while current savings will only last for the next year. If this does not happen, the organization may announce the closure as early as November next year.

In order to gain the right to use Snoop Dogg's "brand", FaZe Clan agreed to give him $1,900,000 worth of shares and a seat on the board of directors, as well as $248,000 worth of shares to each of his sons and companies controlled by his wife and manager, Forbes found out.

This decision attracted a lot of attention from the public and was expected to increase the brand's reach ahead of going public. However, the financial costs were too high to justify the investment in brand value.

Like other esports organizations, finding a way to run a legitimate business has been a major challenge for FaZe Clan, which makes money from prize money, revenue sharing through its content makers and partnerships with established companies.

In the summer of 2022, the North American organization decided to go public by announcing the merger of SPAC with B. Riley Principal 150. Since then, the club has gone public on the NASDAQ, but FaZe Clan shares have steadily fallen in value. And if the shares reached $20.08 in August, then the further fate of the quotes was determined in the region of $1-2.

In September, the club faced new challenges as regulatory filings revealed that approximately $71,400,000 of the initial $100,000,000 investment went down the drain and defaulted. Moreover, 92% of SPAC shareholders chose to buy back their shares for cash at the time of the merger, rather than convert them into new FaZe Clan common shares. As a result, the organization lost an additional $159,000,000 from its trust account.

With the current stock quotes of the organization, FaZe Clan can expect a capitalization of just over $150,000,000. However, the club's latest financial reports show that the company is spending its money quickly, but is not making up for it with investments. It is argued that the sale of new shares seems unlikely, given that their potential value has fallen by more than 80% over the past few months.

Forbes emphasizes that throughout its existence, the FaZe Clan organization was not profitable and relied on external investment. Despite the huge popularity (the number of subscribers of the organization exceeds the population of the United States), the North American club is experiencing problems with its monetization. So, for the first three quarters of 2022, the club's income amounted to $48,600,000, but only $14,000,000 of them were earned through advertising and esports success.

It is with the goal of improving its financial condition that the organization recently entered into new deals with Xfinity and Sandbox, and also renewed its partnership with the McDonald's chain. However, that still isn't enough for the club, which has yet to experience another "shock" in January, when staff and owners will be able to sell their shares.