Dec 7, 2021 - Economy

BuzzFeed's volatile public debut

Source: YCharts
Source: YCharts

BuzzFeed's stock spiked 45% in the first moments of its public debut, before falling to 11% below its initial share price at market close on Monday.

Why it matters: Volatility for a smaller company like BuzzFeed on its first day of trading isn't unusual, but the drama leading up to its public debut suggests investors are wary of how a digital media company like BuzzFeed will fare on a public market.

Catch up quick: BuzzFeed merged with a blank check company called 890 Fifth Avenue Friday, after shareholders voted to approve the deal Thursday.

  • The vast majority of SPAC money the company raised was pulled ahead of the deal closing last week, a signal that investors weren't very optimistic about BuzzFeed's future prospects.
  • Sources tell Axios that employees with vested stock options could exercise them beginning Monday. Those with restricted stock units (RSUs) must wait at least six months before they can exercise their options.

By the numbers: At the end of its first day as a public company, BuzzFeed's valuation was $1.15 billion. The company was valued at $1.7 billion in 2016 when it raised $200 million from NBC Universal.

Driving the news: BuzzFeed CEO Jonah Peretti remained optimistic in an interview with CNBC Monday before markets opened, saying that he still thought "there was a great path for profitability" in the digital media space.

  • BuzzFeed has been releasing quarterly earnings reports for the past three quarters that show the company was profitable in 2020 and anticipates being profitable in 2021.

Yes, but: Without support from SPAC shareholders, BuzzFeed will need to show strong revenue and profit growth as a public company in order to be able to foot the bill for acquisitions the company says are a key part of its long-term growth strategy.

  • The company closed on its first major deal with Complex Networks on Friday, upon approval from shareholders. The deal was worth $300 million in cash and stock.
  • BuzzFeed went public via a SPAC instead of a traditional IPO, in part, so that it could simultaneously acquire Complex Networks while going public.

The big picture: BuzzFeed's public debut marks an important milestone in modern digital media's history.

  • The 15-year-old company becomes the first big digital content company to go public, after raising $500 million from venture and strategic investors.
  • In going public, BuzzFeed finally brought liquidity to many of its early investors that have been anxiously waiting to see whether their investments would prove fruitful in a new internet era.
  • BuzzFeed's business was launched in an era when social media companies still sent lots of traffic to publishers of buzzy, viral content. Today, subscriptions are a bigger part of the digital publishing landscape.

What to watch: Digital media companies like BDG Media, Vox Media and others are closely eyeing BuzzFeed's stock market debut to see if it's a path that makes sense for their businesses.

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