Last summer, esports and entertainment brand FaZe Clan became a publicly traded company. Shares went on sale for $13.00 on the Nasdaq, giving the company a $1 billion valuation. As of the time of this writing, FAZE stock is selling for just $0.80, handing investors a loss of roughly 94 percent since shares started trading.
And things will only get worse for FaZe if that share price stays under a dollar. As noted by Dexerto, if a company's share spends 30 consecutive days below the minimum closing bid of $1.00, it will begin a 180-day countdown to "regain compliance." In this case, regaining compliance would mean having a share price above $1.00 for at least 10 consecutive business days. If it can't, FaZe will be stricken from the exchange.
What caused FAZE to collapse? There are quite a few issues, starting with the fact that FaZe Clan relies on outside investment to continue operations. FaZe has never made a profit (it posted a $19 million loss just last year), so the only way it keeps the lights on is with other people's money. However, FaZe is facing a funding crunch after more than $70 million of an investment defaulted. On top of that, FaZe didn't get nearly as much cash as it wanted from becoming a publicly traded company, according to Forbes, with most shareholders deciding to redeem their shares for cash rather than convert them to FaZe stock.
"These conditions have raised substantial doubt about our ability to continue as a going concern," FaZe Clan said in its most recent quarterly report, "which is dependent upon our ability to generate significant revenue and our ability to raise additional funds by way of our debt and equity financing efforts."
Generating significant revenue will be a challenge in the face of a seemingly endless string of controversies. FAZE fell below $1.00 on Jan 20, briefly went back to $1.00 on January 23, and has been under a dollar since then. Facing insolvency, it’s uncertain if FaZe will be able to bring its stock price back to where it can remain on the Nasdaq.
Source: Read Full Article