FaZe Clan will go public in a SPAC merger valuing the gaming organization at around $1 billion

Faze Clan
FaZe Clan at a “Call of Duty League Finals” esports event in Miami.

  • FaZe Clan will go public in a SPAC merger that values the gaming organization at about $1 billion.
  • The group will tie-up with B.Riley Principal 150 Merger Corp., with plans to list in 2022.
  • FaZe Clan centers around competitive esports teams that play titles like “Fortnite Battle” and “Call of Duty.”

FaZe Clan will go public in a deal with a special purpose acquisition company, valuing the Los Angeles-based gaming group at roughly $1 billion.

FaZe Clan will reach the equity market in the first quarter of 2022 through a deal with B.Riley Principal 150 Merger Corp., the New York-based SPAC said Monday in a statement.

The combined company is expected to have an implied equity valuation of about $1 billion, which includes nearly $275 million in cash on the entity’s balance sheet. The stock will be listed on the Nasdaq.

FaZe Clan was established in 2010 and centers around competitive esports teams that play titles like “Fortnite Battle,” “Call of Duty,” and “PlayerUnknown’s Battlegrounds,” or “PUBG: Battlegrounds.”

More than 350 million people follow the group across its social platforms and through its string of content creators and personalities.

Recent partners include DC Comics, McDonald’s, and Doritos, which are brands trying to reach the organization’s audience of 13- to 34-year-olds, said B.Riley Principal.

“FaZe Clan, sitting at the forefront of the creator economy, with deep roots in gaming and youth culture, is poised to become the leading digital content platform created for and by Gen Z and millennials,” said the SPAC.

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Trying to make sense of Donald Trump’s SPAC? We break it down for you.

Donald Trump
  • Former president Donald Trump is taking his social media company public via SPAC merger.
  • Shares of the SPAC, Digital World Acquisition Company, more than quadrupled in price on the news.
  • Here we answer your burning questions on what’s going on with this deal.

The SPAC craze is back, riding high on the former president’s social media ambitions.

Donald Trump’s soon-to-be-launched social media site, Truth Social, announced Thursday its plans to go public through a special purpose acquisition company, aka a SPAC, called Digital World Acquisition Company. The stock ticker “DWAC” trended on Twitter following the announcement.

As the news goes viral, here are the answers to burning questions about the art of Trump’s latest deal.

So what is a SPAC, again?

SPACs were a nearly dormant financial tool for taking companies public until right around the start of the COVID-19 pandemic, at which point the market became a feeding frenzy for investors, speculators, and retail traders looking to cash in on private companies with big potential for growth.

A SPAC is just a small public company with a whole lot of cash that has one simple goal: to take a private company public. They are also known as “blank-check” companies and the process for a company to go public via SPAC can be easier than the traditional IPO route.

To form a SPAC, a few people, often former bankers or corporate executives and sometimes celebrities, get together in the hopes of finding a worthwhile private company. First, the SPAC goes public, issuing shares and raising money from investors. SPAC shares are usually sold at $10 apiece – just like in the case of Trump Media’s Digital World Acquisition Corp. SPAC, which raised about $283 million in its IPO, according to a filing with regulators.

That war chest of cash will eventually be used to strike a deal with a target company. Digital World Acquisition found Trump Media & Technology Group.

DWAC stock is up how much?

357% at Thursday’s close! Intraday, it was up even more, gaining more than 400% before pulling back.

We’ve seen SPAC stocks go wild after announcing the target company – but not this wild. SPAC stocks normally jump after the deal is announced, even though the target company isn’t public yet (shareholders still need to give the thumbs up).

The stock closed Thursday at $45.50, up from $9.96 the previous day. It was the most-traded stock on the market Thursday, with over 470 million shares changing hands.

Who’s behind this SPAC?

Patrick Orlando is the SPAC’s CEO. He’s a former investment banker and has a hefty background in the SPAC business (he’s been part of three before this one). The company’s chief financial officer is Luis Orleans-Braganza, who currently serves on Brazil’s National Congress.

If you haven’t heard of either of them, you may have heard of some of the high flying hedge funds that have invested in the SPAC, like Highbridge Capital Management, Lighthouse Partners, K2 Principal Fund, and Saba Capital Management. They all likely made a killing on Thursday’s wild price action.

So what’s going on here?

Basically, Orlando incorporated Digital World Acquisition in Miami about a month after Trump lost the election, with the goal of merging with a “leading emerging growth technology company.”

Then today, his SPAC announced it would be taking Trump Media & Technology Group public, on the condition of shareholder approval.

But unlike in other SPAC mergers where the target company discloses its financial statements or future revenue potential, the Trump Media & Technology Group doesn’t have much in the way of financial projections – even though it got a $1.7 billion valuation in the merger.

The goal of the future company is to “create a rival to the liberal media consortium and fight back against the ‘Big Tech’ companies of Silicon Valley, which have used their unilateral power to silence opposing voices in America.” The first step is launching a new site called Truth Social.

What is Truth Social?

That remains to be seen. The future social media site hasn’t actually launched yet, but it has a waitlist. The statement said the eventual site aims to “stand up to the tyranny of Big Tech.

Trump has been wanting to get back on social media since being banned from Twitter and Facebook following the January 6 insurrection – and it hasn’t been easy. At first, he tried sending tweets from other people’s accounts. Then he launched a blog called “From the Desk of Donald J. Trump” that flopped.

“We live in a world where the Taliban has a huge presence on Twitter, yet your favorite American President has been silenced. This is unacceptable,” he said. “I am excited to send out my first TRUTH on TRUTH Social very soon. TMTG was founded with a mission to give a voice to all.”

A beta version of the site could launch as soon as November 2021.

Is this thing for real?

The filings with the US Securities and Exchange Commission are available here.

Even so, Trump’s company going public is all dependent on shareholder approval. According to Julian Klymochko who runs a SPAC-focused exchange-traded fund, he’s never seen a SPAC deal get voted down. Shareholders are incentivized to approve it because of assets called warrants that they receive at the beginning of the SPAC. No deal, and those warrants are worthless.

Is this the next meme stock?

If price action is any indication, it might already be a meme. On top of that, retail traders are piling on, a necessary prerequisite for a stock to achieve meme status. According to Bloomberg, Fidelity logged 55,000 buy orders for shares of the SPAC on Thursday.

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BuzzFeed agrees deal to go public via a SPAC merger with 890 Fifth Avenue Partners

Buzzfeed
  • BuzzFeed agreed to go public via a merger with SPAC 890 Fifth Avenue Partners, a SPAC focused on media and entertainment.
  • It plans to acquire youth-focused digital publisher Complex Networks under the deal.
  • The parent company will be named BuzzFeed, and will be listed under the ticker “BZFD.”
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BuzzFeed agreed to become public through a merger with a special-purpose acquisition company, according to an announcement on Thursday.

As part of the deal with media-and-telecom focused SPAC 890 Fifth Avenue, named after the fictional Avengers mansion, BuzzFeed plans to acquire digital-publisher Complex Networks for $300 million.

The New York-headquartered company’s acquisition of HuffPost last year sparked speculation that it could attempt to buy other digital media rivals by combining with a blank-check company.

Founder and CEO Jonah Peretti and CFO Felicia DellaFortuna will continue to hold their roles, along with other executive board members. Adam Rothstein, executive chairman of 890 Fifth Avenue Partners, and Greg Coleman, an advisor to the SPAC and former BuzzFeed president, will join the company’s board, according to the announcement.

Peretti hopes the Complex acquisition will help the combined organization to scale up in the face of competition from Google and Facebook for digital advertising business, according to the WSJ.

SPACs typically aim to first secure a stock-market listing and then identify a private company to acquire and merge with, offering businesses an alternative to the traditional IPO process. There have been about twice as many listings through blank-check companies so far in 2021, compared with traditional offers. Around $108 billion has already been raised across 349 SPAC IPOs year-to-date, according to data from SPACInsider.com.

The emergence of SPACs is a positive force for digital media, because large-scale companies like BuzzFeed and Vox have mostly given up on selling to major cable or media companies, a media executive told Insider in December.

After the merger, expected to close in the fourth-quarter, the parent company will be called BuzzFeed and will be listed on the stock exchange under the ticker symbol “BZFD.”

Read More: Bank of America says to buy these 31 small- and mid-cap stocks with average implied upside of nearly 30% as they represent its best ideas for the second half of 2021

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BuzzFeed is nearing a deal to go public via a SPAC merger, report says

Buzzfeed
  • BuzzFeed is closing in on a deal to go public via a merger with SPAC 890 Fifth Avenue Partners, WSJ reported.
  • The deal with the blank-check company could come this week, people familiar with the situation told the WSJ.
  • Capital raised would let BuzzFeed go after other digital publishers, as it aims to compete wth Google and Amazon for ad dollars.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

BuzzFeed is closing in on a deal to go public through a merger with special-purpose acquisition company, the Wall Street Journal reported on Thursday.

The deal with media-and-telecom focused SPAC 890 Fifth Avenue, named after the fictional Avengers mansion, could be announced as early as this week, people familiar with the situation told the WSJ. The terms of the deal are not publicly known.

Proceeds from the merger would be used toward making further acquisitions, with Complex Networks seen as a potential target. A deal for the publisher focused on youth culture could significantly boost BuzzFeed’s revenue.

The New York-headquartered company’s acquisition of HuffPost last year sparked speculation that it could attempt to buy other digital media rivals by combining with a blank-check company.

BuzzFeed founder and CEO Jonah Peretti hopes the Complex acquisition will help the combined organization to scale up in the face of competition from Google and Facebook for digital advertising business, the WSJ report said.

SPACs typically aim to first secure a stock-market listing and then identify a private company to acquire and merge with, offering businesses an alternative to the traditional IPO process. There have been about twice as many listings through blank-check companies so far in 2021, compared with traditional offers. Around $108 billion has already been raised across 349 SPAC IPOs year-to-date, according to data from SPACInsider.com.

The emergence of SPACs is a positive force for digital media, because large-scale companies like BuzzFeed and Vox have mostly given up on selling to major cable or media companies, a media executive told Insider in December.

BuzzFeed declined to comment on the WSJ’s report when contacted by Insider.

Read More: Bank of America says to buy these 31 small- and mid-cap stocks with average implied upside of nearly 30% as they represent its best ideas for the second half of 2021

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Ford-backed EV battery producer to go public via SPAC merger at a $1.2 billion valuation

Solid Power Inc batteries
  • Solid Power announced it is going public via a SPAC merger in a deal that would value the entities at $1.2 billion.
  • The company is expected to have $600 million in cash, including $165 million from private investors.
  • Ford Motors and BMW recently participated in the $135 million Series B funding of Solid Power in May.

Electric-vehicle battery producer Solid Power on Tuesday announced it’s going public by merging with blank-check firm Decarbonization Plus Acquisition Corporation III in a deal valued at $1.2 billion.

The company is expected to have approximately $600 million in cash, including $165 million from investors such as Koch Strategic Platforms, Riverstone Energy Limited, Neuberger Berman funds, and Van Eck Associates Corporation. The capital will be used to fund operations and growth.

Ford Motors and BMW recently participated in the $135 million Series B funding of Solid Power in May. The two companies also expanded partnerships with Solid Power to secure all solid-state batteries for future electric vehicles.

Solid Power produces rechargeable batteries for electric vehicles and mobile power markets. The company claims its production mirrors lithium-ion manufacturing processes while eliminating certain expensive and timely steps.

Upon closing of the transaction, which is expected to be completed in the fourth quarter of 2021, the combined company will trade under the Nasdaq ticker “SLDP.”

Solid Power is expected to have a nine-person board composed of a majority of independent directors and will continue to be led by Solid Power’s existing management team.

Other electric vehicle makers went public via SPAC this year such as Lucid Motors and Nikola Corp.

SPACs, shell companies seeking to merge with private companies with the intention of taking them public, have exploded in popularity in the last year.

In 2020, a total of 248 SPACs raised $83.3 billion according to SPAC Analytics. But in the sixth month of 2021 alone, data already show 340 SPACs that have raised $106 billion, comprising 61% of initial public offerings.

Read more: A client portfolio manager at Cathie Wood’s Ark Invest shares which of its ETFs are projected to see the most growth over the next 5 years, and explains the recent downturn in the broader family

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The competition for SPAC mergers is intensifying, with 260 blank-check firms facing deadlines in the next 18 months, report says

NYSE trader

A surge in SPACs over the past year and looming deal deadlines has led to increased competition among sponsor companies to complete a merger, according to a report from The Wall Street Journal.

Since 2020, nearly 600 SPAC companies have raised close to $200 billion, according to data from SPACInsider. But those SPACs typically have a two-year deadline to complete a merger before having to return the money raised to its shareholders.

There are now about 260 SPAC companies sitting on $87 billion in cash that face merger deadlines in the first three months of 2023, the Wall Street Journal reported, citing data from Methuselah Advisors. While deadlines can be extended, it puts added pressure for SPACs to get a deal done.

In the event a SPAC is forced to liquidate, the sponsor will lose money on the upfront fees paid to register and debut the SPAC, which often amounts to several million dollars, according to the report.

The flood of new SPACs is making it harder for deals to get done, as private companies are often fielding multiple calls per week from SPAC sponsors in search of an acquisition, which is known by some on Wall Street as a “SPAC-off.” One such company reportedly talking with as many as 12 SPACs to go public is luxury gym owner Equinox.

“You’re going to see a fair number of less-than-desirable deals done just because they have to get done,” Methuselah’s John Chachas told The Wall Street Journal.

SPAC sponsors often receive deeply discounted shares when a deal is completed, which incentivizes them to get a deal done at any cost, regardless of the quality of the company that may be brought public.

At the same time, private companies could see favorable deal terms if they hold out on going public via a SPAC merger until next year, when sponsors feel the added pressure with a deal deadline looming.

The realization that a flood of SPACs are frantically searching for a deal can be seen in the stock prices of the blank-check companies. While most SPACs traded above their $10 pricing level last year, many now trade below that level.

Only two of the 23 SPACs that announced a deal in May were trading above their IPO price by the end of the month, according to the report.

But the current weak showing in the SPAC space could change if momentum returns to the stock market and investor interest in the space is renewed.

“Three months from now, the market could look very different. It could be game on again,” SPACInsider founder Kristi Marvin told The Wall Street Journal.

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US SEC official warns SPAC dealmakers of the risks and complexities tied to blank-check mergers

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A US markets watchdog official on Wednesday cautioned blank-check company dealmakers about the risks and governance issues that come with raising capital through special-purpose acquisition companies (SPACs).

Paul Munter, the acting chief accountant at the Securities and Exchange Commission, said timelines of such transactions are part of the challenges for private companies that merge with SPACs. That is because their development may still be in early stages.

“Many SPAC acquisition targets may be at an earlier stage in the entity’s development compared to companies that pursue a traditional IPO,” he said in a statement, adding target companies should have a plan to address the demands of becoming public on a speedy timeline.

Munter urged market participants to carefully consider risks, complexities, and challenges in the space, including the consideration of whether target companies are prepared to go public.

SPACs have raised $97 billion across 298 IPOs so far this year, exceeding the previous year’s record of $83 billion raised, according to data from SPACInsider.com.

But March was a rough month for companies in the space as firms and individual investors grew increasingly cautious over SPAC investing. 93% of SPACs that went public in the last few weeks of the month were trading below par value, or $10 per share. JPMorgan said SPAC acceleration may be hitting a peak and could slow for the rest of the year.

Munter made his statement about a week after the regulator wrote to Wall Street banks to seek voluntary information on their SPAC dealings.

“Given the explosion in popularity of SPACs, it’s no surprise that enforcement is asking questions – this is the beginning of what I expect will be heightened scrutiny of trading and disclosures to investors arising from the surge of these transactions,” Doug Davison, partner at law firm Linklaters, said.

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The red-hot SPAC market is cooling off as first-day trading spikes evaporate

SPACs and hedge funds 2x1

The red-hot SPAC market looks to be cooling off as first-day trading spikes that were common in the space earlier this year begin to evaporate.

93% of SPACs that went public over the last week are trading below par value or $10 per share, per Dealogic data compiled by Reuters, That’s 14 out of 15 SPACs this week alone trading below their IPO price.

The biggest first-day jump of a SPAC this month was just 3.5% for Supernova Partners Acquisition Co II Ltd on March 1.

That’s compared to January’s largest first-day pop of 32.5% for Altimeter Growth Corp II and February’s best first-day jump of 24.9% for CM Life Sciences II, per Reuters.

SPACs are “blank check” firms that go public with nothing but cash on their balance sheet. Their sole goal is to merge with or acquire a private company allowing that business to skip the traditional IPO process to make its public debut.

There’s no doubt the SPAC market is booming. SPACs have raised $87.9 billion so far in 2021, according to data from SPAC Research. That’s already more than all of 2020 when SPACs raised $82.1 billion, per Dealogic.

The incredible rise of SPACs means the blank check firms now have over $1 trillion in spending power.

Unfortunately, the rise in SPACs hasn’t always led to great returns for investors, especially retail investors.

According to data from “A Sober Look at SPACs” by Klausner, Ohlrogge, and Ruan 2020, average returns for SPACs 12 months after their merger were negative 34.9% between January 2019 and June 2020.

Billionaire investor Barry Sternlicht told CNBC on Wednesday he believes the SPAC market is “out of control.” These days “if you can walk, you can do a SPAC,” Sternlicht said.

The CEO and Chairman of Starwood Capital, which operates six SPACs of its own, warned about the lack of due diligence done by SPAC sponsors. Sternlicht also said the recent poor performance of SPACs is partly a result of a tech sell-off, because a lot of SPACs are tech-focused.

“People are also beginning to question the euphoria and retail investors are unable to keep up with all these names,” Sternlich told Reuters.

Sternlicht isn’t the only one questioning SPACs recent rise either.

UBS barred financial advisors from making SPAC pitches to clients due to limited availability of research on SPACs before their mergers with private companies. All of this bearish news may be weighing on SPACs’ first-day results.

Read more: Hedge funds are ramping up bets against Chamath Palihapitiya’s SPACs and have already taken home $40 million this year. Here’s a detailed look at the wagers they’re making.

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