Faze Clan stock sees unexpected surge after Nasdaq warning

The esports organization Faze Clan recently received a warning from the Nasdaq stock exchange that they were at risk of being delisted, just six months after going public. Despite this, their stock jumped from 0.72$ to 1.02$ in a surprising turn of events.

Many are wondering why Faze Clan's stock has been down and what happened to cause this drop. The company's journey to going public concluded last July with a merger with the B. Riley Principal 150 Merger Corp (BRPM) special purpose acquisition company (SPAC). The deal valued the combined entity, renamed Faze Holdings, at US$725 million.

However, since then, Faze Holdings has seen its stock price fall from a high of US$24.69 on 30th August 2022 to just 75 cents on 26th January 2023. According to Nasdaq rules, any company that fails to close above the US$1 mark for 30 consecutive days is issued a deficiency notice, which can trigger a delisting.

Despite the recent warning, Faze Clan has 180 calendar days to return to compliance and close above US$1 for ten consecutive days. The company, which bills itself as a gaming, lifestyle and media brand, claims to have a fanbase network of approximately 500 million across its combined social platforms.

Despite the impressive following, Faze Clan has never been profitable and relies heavily on external investment. As reported by Forbes, the esports giant had US$43.9 million in cash on hand as of 30th September 2022, enough to fund current operations only until November 2023.

The recent stock jump may be a sign that Faze Clan can turn things around, but the Nasdaq situation points to ongoing issues in the esports sector. Competitive gaming organizations have yet to find a way to turn their large audiences into profit, making it difficult for companies like Faze Clan to remain profitable without external investment.