BuzzFeed Tumbles in Turbulent Debut for Digital Media
Among today’s crop of large online publishers, BuzzFeed is the first to have its shares trade.
(Bloomberg) -- BuzzFeed Inc. shares fell in their first day of trading, a sign investors are wary of the digital media company after a shaky lead-up to its public debut.
The stock, which trades on the Nasdaq under the ticker symbol BZFD, was down 12% at 11:15 a.m. in New York, after surging earlier in the day. Shares of the blank-check company that BuzzFeed merged with to go public had closed at $9.62 on Friday.
BuzzFeed’s debut as a public company marks a major milestone for the online media company that Jonah Peretti co-founded 15 years ago. It’s also a sign of how other digital media companies could perform on the public market. Among today’s crop of large online publishers, BuzzFeed is the first to have its shares trade.
“The big thing digital media needs for consolidation is a strong public company and we wanted to be the first,” Peretti said in an interview.
BuzzFeed’s journey to the public markets got off to a tough start, however. The company planned to raise $288 million in cash through its merger with a blank-check company, 890 5th Avenue Partners Inc. Instead, most of that business’s investors opted not to participate in the transaction, an option available to participants in special purpose acquisition companies like 890 5th Avenue.
That had left Peretti with just $16 million of the originally intended funds as the company readied its debut.
Peretti said he expected investors would pull their money out because the market for SPACs has cooled. It “won’t meaningfully change our strategy,” he said, noting that BuzzFeed will still have money raised from a $150 million convertible note that’s part of the transaction. As a public company, BuzzFeed can also use its stock as a currency to buy other businesses, he said.
BuzzFeed’s arrival as a public company will lead to management changes. The company is in talks to name Michael Del Nin as its new president, Peretti said. Del Nin was formerly co-chief executive officer of Central European Media Enterprises Ltd., one of Europe’s largest television broadcasters, and an executive at Time Warner Inc., now known as WarnerMedia. He would report to Peretti.
Del Nin has a track record leading an exchange-listed company that Peretti doesn’t have.
“I’m an entrepreneur,” Peretti said. “I don’t have public market experience so we’re adding that to the team as part of this transaction.”
Investors have poured more than $190 billion into SPACs since last year, according to data compiled by Bloomberg. While they are seen as being a fast way to go public, they often underperform traditional initial public offerings.
Peretti said BuzzFeed likely would have done an IPO if the pandemic hadn’t disrupted its business. He called the SPAC “a means to an end.”
BuzzFeed’s big moment has also been soured by a labor dispute. On Thursday, BuzzFeed News employees walked off the job to protest what they say is the company’s failure to agree to a fair labor contract.
“It’s a negotiation and it’s hard and there’s disagreement around points,” Peretti said of the walkout. “The bargaining table is where they wanted to have those conversations, so that’s where we’re having them.”
Peretti described BuzzFeed and Complex as complementary businesses, with Complex stronger in male-focused topics like sneakers and streetwear.
Last month, BuzzFeed said its third-quarter revenue grew 20%, helped by an improvement in ad sales. But it also saw a slowdown in sales of goods, citing supply chain issues, and it expects that to continue in the fourth quarter. BuzzFeed sells, among other things, a line of cookware at Walmart named after its food brand Tasty. The business is seen as a way for BuzzFeed to rely less on advertising.
BuzzFeed’s multiple revenue lines allow it to adapt when one area of its businesses slows, according to Peretti.
“The most important thing is we have a resilient, diverse business that can manage through changes in the marketplace,” he said.
Peretti co-founded BuzzFeed in 2006. From the start, the company had a unique ability to create posts that took off on the internet, like “What Colors Are This Dress?” and making a watermelon explode on live video using rubber bands. But it also has gone through its share of struggles, including multiple rounds of layoffs over the years, partly because tech giants have dominated the online ad landscape.
Peretti predicted the company would be making more acquisitions as a public company, including, potentially, subscription-based publishers.
“This gives us this new platform to do a lot of things that were impossible to do before as a private company,” he said. “It’s an exciting moment for us.”
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