B. Riley Principal 150 Merger Corp (NASDAQ: BRPM) has all but ensured that its looming merger agreement with FaZe Clan will close, Esports Insider understands. When this happens, FaZe Clan will join the growing number of publicly traded esports companies.
A client newsletter from B. Riley obtained by Esports Insider confirms that the most meaningful barrier to completing the merger agreement has essentially been removed.
Amid industry-wide layoffs and growing fears about the fallout of the deal, the consequential vote on July 15th could impact business decisions and planning across the industry.
According to B. Riley, the SPAC sponsor, the minimum amount of cash FaZe needed on hand to complete the deal has been waived.
SPAC merger votes are typically two-part votes. In essence, shareholders can vote to merge and still recoup their cash investment in the SPAC. However, even if shareholders vote to approve, typically the cash in the SPAC after redemptions must meet a minimum cash requirement.
In this case, the cash requirement has been waived, vastly increasing the odds the vote will succeed.
While it is possible for the vote to still fail, there is very little incentive for investors to block the merger as they can redeem their investment either way.
In addition, FaZe’s amended S-4 filing included a supplementary agreement labelled ‘FaZe Support Agreements’. This revealed that certain shareholders entered into an agreement that would require them to vote to approve the merger and to exercise outstanding warrants prior to the deal closing.
Warrants are a key component of SPAC deals. When initially offered, SPAC shares are sold as a bundle with either a whole or partial warrant.
These warrants can be exercised later, giving the owner the option to buy stock at a set price. In BRPM’s case, this price is $11.50 per share.
If a merger is not completed, the warrants are worth nothing. Additionally, warrants typically last for years meaning there is no immediate pressure to use them. As a result, it is highly unusual to exercise a warrant without knowing if a merger agreement will be approved.
However, there is a key benefit to exercising warrants now — BRPM can create more outstanding shares that will vote in favour of the agreement.
Despite these movements behind the scenes, the BRPM stock price has fallen approximately 18% since July 12th 2022.
While the stock has hovered just shy of $10 (~£8.50) per share since December 2021, at the time of writing the share price had fallen to approximately $8.15 (~£6.91).
This likely indicates that investors believe FaZe will be worth less than the nearly $1bn (~£850m) initial valuation after the merger has been completed.