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Illustration: Annelise Capossela/Axios

Something rare is happening with regularity in the digital media world: all-stock acquisitions by private companies.

Why it matters: It's hard to negotiate a deal when you're paying in stock with limited liquidity and valuation uncertainty.

  • In certain circumstances, however, such acquisitions can look attractive to both sides.

Driving the news: Vox Media is buying Group Nine Media in an all-stock deal. Both sides are themselves products of the trend: Vox previously bought New York Media, while Group Nine previously bought PopSugar, both in all-stock deals.

  • Rival digital-media company BuzzFeed bought HuffPost in the same way last year.

The big picture: When private companies get acquired, they overwhelmingly get bought for cash, according to data from SRS Acquiom. Only between 2% and 3% of such deals are done purely in stock — and in most of those cases the buyer is a public company, so the valuation is unambiguous.

Between the lines: To be able to get the attention of advertisers spoiled by the Facebook-Google duopoly, digital media companies need scale. That's both a carrot and a stick: Becoming part of a significantly larger operation should increase a company's valuation multiple, while failing to do so can be an existential risk.

  • When the target company is losing money, as both HuffPost and New York Media were doing, the urgency to sell becomes even greater.

How it works: All-stock deals can sometimes have valuation figures attached to them, but ultimately those numbers are meaningless. In all-stock deals there's no haggling over absolute valuations, just relative valuations. Which is often easier.

  • These mergers aren't an exit for the target company's shareholders. Instead, they're a way to stay alive and hitch your wagon to a star you helped create.

Be smart: For much of the past year, conventional wisdom held that the way for digital-media companies to grow was going public via a SPAC. That would give hungry would-be acquirers hundreds of millions of dollars of cash, as well as as the ability to effectively print money by issuing new shares in takeover transactions.

  • BuzzFeed shows the danger of SPACs, however. The promised cash never materialized, as SPAC investors redeemed their investments before BuzzFeed was acquired.
  • BuzzFeed's sinking public share price also means it can't spin fanciful stories about how much a combined company might be worth.

What they're saying: "Doing a stock deal like this signifies that we can be the acquirer of choice," Group Nine CEO Ben Lerer told Axios' Sara Fischer. "We have a currency that's going to be valuable."

  • In the current digital media climate, only by remaining private can Lerer keep that dream alive. Then, if and when the weather changes, Lerer still has a SPAC he can use to take Vox Media public.

The bottom line: It's easy to see why companies would like a roadmap to dollars when they're being bought. But a deal denominated in private stock can still be more attractive than remaining independent.

Go deeper

Ina Fried, author of Login
Jan 14, 2022 - Technology
Column / Signal Boost

Tech giants play the blame game

Illustration: Brendan Lynch/Axios

With regulators around the world looking at reining in Big Tech, the companies in the crosshairs are increasingly eager to point out their rivals' sins.

Why it matters: Investigations in the U.S. and around the world are targeting Apple, Google, Facebook, Microsoft and Amazon. To make their case, regulators need to show the companies are squelching competition — a task the tech companies may be aiding with their infighting.

2 hours ago - Health

Government website for free COVID tests launches early

COVID-19 rapid at-home test kits. Photo: Mario Tama/Getty Images

The website where Americans can request free, at-home rapid COVID-19 tests from the government launched Tuesday and is now accepting orders.

Driving the news: The website went live in its beta phase and is operating at a limited capacity a day before its official launch. Every home in the U.S. is eligible for up to four COVID tests, according to the website.

AT&T, Verizon extend 5G delay over airline panic

Illustration: Brendan Lynch/Axios

AT&T and Verizon said Tuesday they would delay lighting up its 5G signals near a limited number of airports after renewed opposition from the aviation industry over concerns about signal interference.

Why it matters: The CEOs of leading airlines warned of catastrophic disruption to flights if AT&T and Verizon deployed 5G as planned this week.

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