BuzzFeed’s Bumpy Stock Market Debut Could Be a Warning Sign for Media Companies - Vanity Fair
BuzzFeed, which struck a deal to go public via a SPAC merger in June, listed its shares on the stock exchange Monday—a major milestone for any company, and particularly for a media startup known as much for Pulitzer Prize-winning reporting as its listicles. But while co-founder and CEO Jonah Peretti had months earlier touted his agreement with publicly-traded shell company 890 5th Avenue Partners (and with it, BuzzFeed’s acquisition of Complex) as “the future of media,” Monday’s move onto the public market seemed, by day’s end, more like a warning sign—or, at the very least, a reality check. BuzzFeed’s stock briefly spiked, at one point by more than 50 percent, before falling later in the day, closing down 11 percent from its starting price. It was, as the New York Times reported, a “disappointing” public debut “underlining how hard it will be for digital media companies to become the giants that they aimed to be.”
There were recent indications that BuzzFeed’s SPAC merger wasn’t exactly panning out as Peretti had described back in June. Roughly 94 percent of the $287.5 million raised by the SPAC was withdrawn by investors before the first day of trading, the Wall Street Journal reported last week, as BuzzFeed conceded that it expected to net just $16 million from the deal. The investor withdrawals—which a source familiar with BuzzFeed’s strategy told the Journal were expected and wouldn’t affect the company’s plans—coupled with restrictions on early trades for some existing shareholders, amounted to only a small fraction of BuzzFeed’s shares in play on Monday, meaning that even small trading fluctuations had an outsize impact on share price. Monday’s closing price had the company worth just over $1.13 billion, according to the Times.
Still, CJR’s Jon Allsop notes that “BuzzFeed is the first major digital-media company ever to go public.” However turbulent the process, rivals seemed to see BuzzFeed’s public debut as an accomplishment in and of itself. “Just the fact that BuzzFeed is out in the public markets is a milestone for the industry,” Brian Goldberg, the CEO of Bustle Digital Group, told the Times, adding that “a lot of us feel that with renewed optimism and hopefully greater access to capital we can continue to grow without so much uphill opposition.” Goldberg, whose company is planning to go public next year, offered that perspective to the Times prior to the share price’s decline, calling the first hour of trading not “just a positive surprise” but “a spit-out-your-coffee type of surprise.” Later on Monday, CNBC’s Alex Sherman called BuzzFeed’s first few hours on the public market “emblematic of the digital media industry’s last ten years, or even last year. Things were looking up. Now they’re not.”
Peretti, for his part, seemed prepared for a rocky debut, telling the Times on Friday, “I don’t care how we go public” and “once we saw that we had our path through that market—even though the market was cold—it was just a means to an end to get public.” In a comment to Insider, Katie Notopolous, a senior technology reporter for BuzzFeed News, also didn’t seem worried about first-day volatility. But the outlet reported other frustrations, particularly those of former staffers who wanted to convert their stock options into shares but were unable to do so due to “delays and confusion.” Per Insider, “Former employees were told by BuzzFeed on December 1 to convert their options via Continental, a third-party transfer agent.” BuzzFeed’s stock administration team reportedly told them to expect the process to take three to five days, but ex-staffers told Insider that “transferring from Continental to a brokerage account could take an additional few business days…effectively closing them out from trading for now.” To add to the pileup, Continental operators reportedly remarked to two ex-BuzzFeeders about the deluge of calls they were receiving.
A BuzzFeed spokesperson said the company is working to move things along, but “former employees were left wondering if BuzzFeed slowed down the process to prevent them from quickly dumping shares,” Insider reported. One even did so publicly. “A fun thing about the BuzzFeed IPO is that they’ve made it virtually impossible for former employees to trade their shares on the first day,” the Washington Post’s Molly Hensley-Clancy, a former national politics reporter for BuzzFeed News, wrote on Twitter. “Almost makes you feel like they see you differently than super-rich major investors but I know that’s crazy talk.”
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