BuzzFeed falls heavily on the stock market

Black Monday for BuzzFeed. The American media fell by 41% in a single session!

Unheard of in its short stock market life, this pure player having entered Wall Street last December. BuzzFeed has seen its capitalization melt by three-quarters since its IPO via a SPAC (Special Purpose Acquisition Company), a listed shell whose purpose is to make acquisitions.

The group, which acquired its competitor HuffPost at the end of 2020, has a market capitalization of just over $300 million.

According to a BuzzFeed spokesperson interviewed by the “Wall Street Journal”, the end of the ban on the sale period of certain large shareholders (known as the “lockup period” and intended to stabilize shareholding for a period) s was completed in early June. In addition, the company has a low float (share of securities that can be traded on the stock market), which explains why it is more sensitive to variations.

Its major shareholders are Comcast (NBCUniversal), venture capital firm New Enterprise Associate and media group Hearst Corp.

Complicated IPO

If it is fairly standard to see a share fall at the end of a “lockup period”, the fall is, this time, quite spectacular.

And it illustrates, once again, the difficulties with the Stock Exchange of this American media, which presents itself as the leader among young people ( millennials and generation Z ) in terms of time spent. Already for its first steps on the Nasdaq, BuzzFeed had given some cold sweats to investors: the title had climbed 50% before closing down 11%.

And, even before the IPO, investors took over 94% of their investment in the SPAC, signaling their skepticism with regard to the group’s prospects, but also concerns about this type of stock market vehicle in general. Functioning much like blank checks, SPACs raise money for an acquisition and merger with a target. But investors can exit before this merger, which they did in the BuzzFeed case.

Rowdy action

In fact, the media, which in addition to HuffPost, owns Tasty, raised much less funds than expected. And since this difficult entry, the action has been heckled.

In March, the group founded by Jonah Peretti announced that it would miss its 2021 revenue target by no less than 20% ($398 million instead of the expected $521 million). At the same time, he had communicated on a voluntary departure plan in his News division, which won a Pulitzer Prize last year for an investigation into Muslim camps in the Xinjiang region of China.

The group depends on digital advertising, primarily sponsored content or brand content, as well as, to a lesser extent, e-commerce commissions or sales of BuzzFeed labeled products. These increased in 2021 but fell in the first quarter of 2022.