Binance’s unusual Forbes deal comes amid SPAC drama
By investing $200 million in Forbes, Binance — the world's largest cryptocurrency exchange — is allowing Forbes' majority Chinese investor to pull a lot of its money before it's expected to go public via a special purpose acquisition company (SPAC).
Why it matters: In a typical SPAC merger, the principal investors of the firm being taken public don't extract their cash at this stage while simultaneously asking institutional investors to back the new entity.
- Taking money out now sends a signal from the majority investor, Chinese investment firm Integrated Whale Media (IWM), that it doesn't have confidence in the company.
How it works: Binance's money will replace half of a $400 million so-called PIPE that was raised as part of the Forbes SPAC, officially known as Magnum Opus.
- The SPAC merger is structured so that Forbes' current owners, IWM (95%) and the Forbes family (5%), will receive a $400 million secondary round when the SPAC merger is complete.
- The deal makes Binance the second-largest owner in Forbes, behind (IWM), according to a source familiar with the matter. IWM purchased its stake in 2014.
The intrigue: In late 2020, Binance sued Forbes for defamation over documents leaked to Forbes that reportedly revealed Binance's efforts to evade regulators. Months later, Binance quietly dropped the multi-million dollar lawsuit.
Zoom out: SPACs became a popular alternative for businesses looking to go public without having to go through a traditional, more cumbersome, IPO process.
- But investors have grown wary of SPACs in recent months, as evidenced by the increasing level of SPAC redemptions, when investors sell their shares before the merger closes.
- Several digital media companies eyed SPACs as a way to go public, but BuzzFeed's SPAC woes could prompt some to think twice.
The big picture: The Forbes SPAC has been wrought with issues from the beginning. The deal has long been met by hesitation from some members of the Forbes' leadership team, Axios has previously reported.
- Sources tell Axios that some members of Forbes' leadership, including those from the Forbes family, were more interested in a private buyout from a bid led by investment firm GSV.
- The latest GSV bid, according to a pitch deck obtained by Axios late last year, values Forbes Media at a $620 million. The SPAC merger values Forbes Media at $630 million.
Between the lines: Forbes has long experimented with blockchain, so an investment from Binance isn't totally unusual.
- Other companies, like blockchain software firm Block.one, had also expressed interest in buying out Forbes at one point, as Axios previously reported.
- Forbes experimented briefly with publishing stories to the blockchain in 2018.
Be smart: The Forbes brand outside of the U.S. still carries leverage, which is why companies like Binance may want to invest. Western business brands can be valuable to investors looking to sell conferences or ancillary products in the East.
- Fortune sold to Chatchaval Jiaravanon, a Thai businessman, in 2018 for $150 million.
- The Financial Times sold to Japanese media giant Nikkei in 2015 for $1.3 billion.
What to watch: New paperwork filed by Magnum Opus Thursday shows that the company and IWM agreed to extend their SPAC termination agreement deadline from February 26 to March 31.
Go deeper: Private investors plot Forbes buyout as SPAC alternative
Editor’s note: This post has been updated to reflect news paperwork filed since the post was originally edited.