Investing

Is E-sports Gaming Giant FaZe Holdings (FAZE) Primed for a Short Squeeze?

E-Sports and entertainment company FaZe Holdings (US:FAZE) (formerly FaZe Clan) has been grabbing attention by the retail investing cohort recently as the B Riley lead SPAC merger-born stock which dived on listing, posted an impressive turnaround rally that saw the stock move over +100% higher in early-August.

After giving up more than half of the gains by mid-August, the stock again began to march higher at a more consistent rate.

FaZe Clan has dubbed as the fourth most valuable E-Sports company according to Forbes in 2022.

The stock has generated some interest by redditors on Wall Street Bets throughout August with some claiming the stock as a potential candidate for a gamma squeeze.

Over the last few weeks, FAZE has risen to the top of Fintel’s US Short Squeeze Leaderboard with a bullish score of 99.78.

This has been a function of the platform’s proprietary modelling that incorporated the high short interest float percentage of 99.38% with an inflated borrow fee rate of 678.14 and 1.96 days to cover.

A list of recent short sale transactions can be found here.

In addition to this score, FAZE moved 2 ranks higher and now is the 9th most likely stock to receive a Gamma Squeeze according to the Fintel leaderboard that incorporates options activity into this data. Fintel’s modelling provides FAZE with a Gamma Squeeze score of 98.91.

This is driven by the stock’s net call open interest volume currently equating to ~37% of the company’s total float.

An interesting point worth noting was the recent 13D filing by AEC (Atlanta E-Sports Ventures) which disclosed a 5.3% stake in the company. AEC is a joint venture between Cox Enterprises and Province.

Cox Enterprises is a privately held global conglomerate headquartered in Atlanta, Georgia while Province is a national advisory firm focused on growth opportunities, restructuring and fiduciary related services.

While no direct statement was provided about the intention of the investment, the backing signals a level of confidence in the future prospects and outlook of the company.

B Riley Principal Merger Corp Investor Presentation

WIth significant interest picking up in the stock, it is worth looking into the investment thesis and why the merger occurred in the first place.

As cited from the SEC filing archive, FaZe has now expanded beyond its clan gaming roots and is “becoming a voice of youth culture” with a combined social media reach of over 350 million users with around 120 million being unique.

The company sees organic revenue growth coming from sponsorships, content, merchandise, E-Sports, international expansion and other IP vertices which they believe will lead to increased monetization per user. The outlook supports a revenue growth opportunity of “~10-200x today’s levels”.

Management included revenue, gross profit and adjusted EBITDA forecasts to FY25 that provides a planned runway to profitability.

FaZe highlighted that 80% of their audience is aged between 13-34 years old which has been regarded as a demographic that has traditionally been harder for advertisers to reach with traditional media.

This article originally appeared on Fintel

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