Metaverse company Infinite Reality revealed this week that it plans to go public in 2023 via a merger with a Nasdaq-listed SPAC (special purpose acquisition company. On Monday, Infinite Reality announced that it had entered into a “definitive business combination agreement” with the SPAC Newbury Street Acquisition Corporation (Nasdaq: NBST). Additionally, Infinite Reality is looking to raise a PIPE (private investment in public equity) as part of the process of going public.
Infinite Reality claims that the merger—excluding any money from a potential PIPE—will generate $128M USD in proceeds, and the “combined company” will have an equity value of $1.85B, including approximately $1.7B attributable to Infinite Reality. After the proposed business combination is complete “NBST” will officially change its name to “Infinite Reality, Inc.,” and the new company’s common stock, warrants and units are expected to be listed on the Nasdaq Stock Market. The deal will be consummated “during the first quarter of 2023,” according to a release.
This is a fairly impactful deal for esports and gaming because earlier this year Infinite Reality bought ReKTGlobal for $470M in an “all-stock deal” based on an equity valuation of $2B, with a “combined post-close valuation” of $2.47B. That deal included Greenlight Content, which runs gaming-focused editorial sites, and ReKTGlobal’s two prominent esports franchises–London Royal Ravens and Rogue–were acquired as part of the deal.
So what is a PIPE and a SPAC? If you paid attention to FaZe Clan becoming a publicly-traded entity earlier this year, maybe you already know, but in case you don’t: the U.S. Securities & Exchange Commission (SEC) describes a PIPE as follows:
“In a PIPE offering, investors commit to purchase a certain number of restricted shares from a company at a specified price. The company agrees, in turn, to file a resale registration statement so that the investors can resell the shares to the public. To the extent that they increase the supply of a company’s stock in the market, PIPE offerings can potentially dilute the value of existing shares.”
The SEC defines a SPAC as follows:
“SPAC stands for special purpose acquisition company, and it is a type of blank check company. SPACs have become a popular vehicle for various transactions, including transitioning a company from a private company to a publicly traded company. Certain market participants believe that, through a SPAC transaction, a private company can become a publicly traded company with more certainty as to pricing and control over deal terms as compared to traditional initial public offerings, or IPOs.”
While Infinite Reality is expressing confidence in becoming a publicly traded company, the volatility of the global economy, the performance of similar stocks such as Faze Clan’s (which is currently trading at $2.10 USD–a 78.29% decline over the last six months with an all-time high/low range of $24.69/$1.72), and the cooling perception of new technologies such as blockchain/web3/metaverse/crypto, might give some investors pause.