BuzzFeed Set to Go Public

Merging with SPAC, acquiring Complex Networks, but 94% of SPAC money withdrawn

Youth-oriented digital media company BuzzFeed Inc. is on the verge of going public through a merger with 890 5th Avenue Partners, Inc. (ENFA), a special purpose acquisition company (SPAC), or blank check company. After the merger, the surviving entity will be renamed BuzzFeed Inc., with trading due to begin on Monday, Dec. 6, 2021 under the symbol BZFD.

While the Dec. 2, 2021, special meeting of shareholders in 890 5th Avenue Partners approved the deal, many investors cast a vote of no confidence by withdrawing their funds. As a result, BuzzFeed will receive a cash infusion of just $16.2 million from SPAC investors, less than 6% of the $287.5 million that previously had been held in trust for it.

However, BuzzFeed expects to raise $150 million through a convertible note issue. Both the merger with the SPAC and the $300 million acquisition of Complex Networks, another youth-focused digital media company, are expected to close on Dec. 3, 2021.

Key Takeaways

  • Youth-oriented digital media company BuzzFeed is set to go public through a merger with a SPAC.
  • Trading could begin as early as Dec. 6, 2021, under the symbol BZFD.
  • The deal includes acquiring Complex Networks, another youth-focused digital media company.
  • However, investors in the SPAC withdrew 94% of their funds.

SPAC vs. IPO

BuzzFeed decided to go public via a SPAC because this process is much faster than a traditional initial public offering (IPO), cutting the time by as much as 75%. Another advantage is that BuzzFeed and the SPAC can offer predictions and projections about the future that typically are prohibited in the traditional IPO process.

Also, going public in this fashion allows BuzzFeed to complete its merger with Complex Networks simultaneously. The board of directors of 890 5th Avenue Partners had approved the deal on June 23, 2021, subject to further approval from a special meeting of shareholders that took place on Dec. 2, 2021.

Investors in a SPAC have the option to withdraw their funds before that SPAC finalizes a merger. This protection is particularly valuable to those who invested in that SPAC before its merger target became known. Meanwhile, investors who buy shares in a SPAC that is trading below its offering price have the opportunity to lock in a profit if they exercise the withdrawal option, thereby receiving the offering price plus interest.

Since the end of July 2021, the average SPAC has seen 60% of its funds withdrawn before its merger deal goes through, up from 25% during the first seven months of 2021. SPACs whose share prices are below their listing prices, as has been the case with 890 5th Avenue Partners for months, have proven to be the most susceptible to withdrawals.

Financial Data and Projections

After combining with Complex Networks, BuzzFeed expects to record $521 million in revenue in 2021, $624 million in 2022, and to exceed $1 billion by 2024. The company reportedly projects that about one-third of future revenue will be derived from merchandise sales, including items bearing the BuzzFeed logo.

In Q3 2021, BuzzFeed reported revenue of $90 million, up by 20% year over year (YOY). While this produced a net loss of $3.6 million, the company indicates that its calculation of adjusted EBITDA showed a profit of $6.0 million, an improvement of 114% YOY.

Complex Networks offers BuzzFeed the opportunity to achieve an immediate increase in its numbers of readers and advertisers, but with slower overall revenue growth. Combined with Complex Networks, BuzzFeed would have reported revenue of $121 million in Q3 2021, up by 17% YOY.

In Q3 2021, Complex Networks reported revenue of $31 million, up by 9% YOY. It recorded a net loss of $3.1 million, 32% worse than the $2.4 million loss in the same period of 2020. Adjusted EBITDA was $333,000 in Q3 2021, down by 64% from $914,000 in the same period of 2020.

EBITDA is an alternate measure of profits that some management teams, analysts, and investors use to measure corporate performance. It is an acronym for earnings before interest, taxes, depreciation, and amortization. BuzzFeed makes additional adjustments, as described below.

BuzzFeed has this to say about its focus on EBITDA: "BuzzFeed defines Adjusted EBITDA as net income (loss), excluding the impact of net income (loss) attributable to non-controlling interests, income tax provision (benefit), interest expense, interest income, other income, net, depreciation and amortization, stock-based compensation, restructuring costs, and other non-cash and non-recurring items that management believes are not indicative of ongoing operations. BuzzFeed believes Adjusted EBITDA is relevant and useful information for investors because it allows investors to view performance in a manner similar to the method used by its management."

Other Key Statistics

BuzzFeed reports that it has 97 million unique monthly visitors aged 18 and up, of whom 38 million are Generation Z or Millennials. Moreover, 73% of persons in the Generation Z and Millennial categories read BuzzFeed each month, and BuzzFeed is number one in time spent among these demographic groups. BuzzFeed is the parent company of HuffPost and Tasty Lifestyle Brands. Interestingly, BuzzFeed also has listed Complex Networks on its website as one of its brands, even before the formal merger agreement.

Union Grievances With BuzzFeed

As a whole, including HuffPost, BuzzFeed currently has about 1,100 employees. The figure would rise to about 1,400 if its planned merger with Complex Networks is completed. Following mass layoffs, BuzzFeed employees voted in February 2019 to join the NewsGuild of New York, citing "legitimate grievances about unfair pay disparities, mismanaged pivots and layoffs, weak benefits, skyrocketing health insurance costs, diversity and more."

The COVID-19 pandemic has led to a significant rise in unionization efforts among media companies. This has been particularly true among newer digital-first media companies that are shedding jobs as they consolidate. After acquiring HuffPost in November 2020, BuzzFeed laid off 47 of its employees, informing them via e-mail.

The union, which also represents employees of The New York Times and other media outlets, announced that its members at BuzzFeed would stage a walkout on Dec. 2, 2021, the date of the shareholder vote on the SPAC merger. All 61 union members at BuzzFeed News reportedly were participating, including reporters, editors, photographers, and designers.

The BuzzFeed News union posted this statement on Twitter: "We've been bargaining our contract for almost 2 years, but BuzzFeed won't budge on critical issues like wages—all while preparing to go public and make executives even richer. So TODAY, we're walking out to send a reminder that there's no BuzzFeed News without us."

The union's full statement says, in part: "Management has only offered 1% guaranteed wage increase per year and they have not budged on their proposed $50,000 salary floor. That's not enough to live in the major cities like New York and San Francisco where BuzzFeed has newsrooms."

Another point of contention for the union: "BuzzFeed management has dug in on a proposal regulating the creative work many of us do outside of our jobs, and it's more restrictive than the current policy. It would require that union members get approval to so any outside 'content' work—including pitching a freelance article that falls outside of your newsroom beat, writing a personal Medium post about your mental health, posting outfits on Instagram, or even doing a makeup tutorial on TikTok. We live a large part of our lives online, especially in the ongoing pandemic, and BuzzFeed management is trying to stake out ownership over those lives, our free time, and hobbies."

Revenues for advertiser-supported websites often follow a pay-per-click model. As a result, some of these sites make the number of page views, or clicks, generated by an article a key element in the compensation formula for the writer. This is an indirect way of making the revenue generated by an article a factor in the writer's pay.

The union also insists that writers should "not be disciplined over traffic or revenue metrics." Its statement elaborates: "Pageviews and clicks are not something an individual can control and are often influenced by social media algorithms and reader biases. We believe when you come to BuzzFeed News, you should be able to trust that we are motivated not by clicks, but by honest reporting."

Pandemic Delays

BuzzFeed was started in 2006 and had aimed to go public before the pandemic hit, but COVID-19 put those plans on hold. Other digital media companies will be watching closely how BuzzFeed trades. BDG Media, formerly Bustle, reportedly is still aiming to go public via a SPAC next year. Vox Media also is considering going public via a SPAC but may be exploring a range of other options.

Article Sources
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  1. Public Holdings, Inc. "Buzzfeed IPO: What You Need to Know About a 2021 Public Offering." Accessed Dec. 3, 2021.

  2. U.S. Securities and Exchange Commission. "Proxy Statement of 890 5th Avenue Partners, Inc." Accessed Dec. 3, 2021.

  3. The New York Times. "BuzzFeed Plans to Start Publicly Trading in Early December." Accessed Dec. 3, 2021.

  4. The Wall Street Journal. "BuzzFeed Suffers Wave of SPAC Investor Withdrawals Before Going Public." Accessed Dec. 3, 2021.

  5. Axios. "BuzzFeed to Go Public, After Shareholders Approve SPAC Deal." Accessed Dec. 3, 2021.

  6. Charles Schwab. "SPACs: What Investors Should Know Now." Accessed Dec. 3, 2021.

  7. BuzzFeed Inc. "BuzzFeed Inc. Reports Results for the Third Quarter Ended September 30, 2021." Accessed Dec. 3, 2021.

  8. U.S. Securities and Exchange Commission. "Proxy Statement of 890 5th Avenue Partners, Inc." Accessed Dec. 3, 2021.

  9. BuzzFeed Inc. "Investors." Accessed Dec. 3, 2021.

  10. Axios. "BuzzFeed News Union Members Plan Walkout for Same Day as SPAC IPO Vote." Accessed Dec. 3, 2021.

  11. The New York Times. "BuzzFeed News's Union Workers Walk Off the Job for a Day." Accessed Dec. 3, 2021.

  12. Twitter. "BuzzFeed News Union Is Walking Out!" Accessed Dec. 3, 2021.

  13. Axios. "Media Startups Anxiously Await BuzzFeed's Stock Market Debut." Accessed Dec. 3, 2021.

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