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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.

Federal judge blocks Biden's vaccine mandate for federal workers

President Biden speaking from Eisenhower Executive Office Building on Jan. 21. Photo: Yuri Gripas/Abaca/Bloomberg via Getty Images

A federal judge in Texas blocked the Biden administration from enforcing its coronavirus vaccine mandate for federal workers on Friday, citing the outcome of last week's Supreme Court ruling that nullified the administration's vaccine-or-test requirement for large employers.

Why it matters: It's a blow to President Biden's efforts to increase the U.S.' vaccination rates, though much of the federal workforce has already been vaccinated against the virus.

Updated 2 hours ago - Politics & Policy

Omicron dashboard

Illustration: Brendan Lynch/Axios

  1. Health: Pfizer and Moderna boosters overwhelmingly prevent Omicron hospitalizations, CDC finds — Omicron pushes COVID deaths toward 2,000 per day — The pandemic-proof health care giant.
  2. Vaccines: The case for Operation Warp Speed 2.0 — Starbucks drops worker vaccine or test requirement after SCOTUS ruling — Kids' COVID vaccination rates are particularly low in rural America.
  3. Politics: Biden concedes U.S. should have done more testing — Arizona says it "will not be intimidated" by Biden on anti-mask school policies.
  4. World: American Airlines flight to London forced to turn around over mask dispute — WHO: COVID health emergency could end this year — Greece imposes vaccine mandate for people 60 and older — Austria approves COVID vaccine mandate for adults.
  5. Variant tracker

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