This week kicked off with a public debut that has Wall Street buzzing. News and entertainment media giant BuzzFeed (NASDAQ:BZFD) began trading today and so far, its performance wouldn’t generate the type of bubbly headline for which the site is known. The company, which came public through a merger with 890 5th Avenue Partners, includes popular media brands BuzzFeed, BuzzFeed News, HuffPost, Tasty Brands and mostly recently, Complex Networks. Even the fact that its trading debut announcement was paired with an important acquisition wasn’t enough to help BZFD stock pick up momentum.
What’s Happening With BZFD Stock?
After a quick pop in early morning trading, BuzzFeed began to see declines. As of this writing, BZFD stock is currently in the red by almost 4% and despite a slight uptick, it has a lot of ground to cover before Wall Street will stop shaking its head in skepticism.
Blank-check partner 890 5th Avenue Partners had originally priced its shares at $10, but by last week, its stock had dropped to $9.62. Even more ominous, though, were the investor withdrawals that the company experienced just days before its debut. These resulted in BuzzFeed raising only $16 million and going public with a valuation of $1.5 billion, lower than it had been when it received a sizable investment from NBCUniversal in 2016.
Why It Matters
As the New York Times reported this morning, the debut of BZFD stock is a test for other digital media companies who may be considering going public. Perhaps the more accurate term might have been warning, though. BuzzFeed has just lost a lot of money and unless it sees a major turnaround within the next few hours, it will join the ranks of choppy SPAC debuts.
To be fair to BuzzFeed’s management team, the SPAC market has definitely shifted since the company first began exploring merger options. Just today, both Lucid Motors (NASDAQ:LCID) and Digital World Acquisition (NASDAQ:DWAC) were hit with news of U.S. Securities and Exchange Commission probes. NerdWallet (NASDAQ:NRDS), which came public through a traditional IPO, is down 30%. It seems media company offerings in general are losing steam.
However, some of the drama with the BZFD stock debut is company specific. It seems early SPAC investors were less than thrilled at the idea of taking BuzzFeed public. That means, when it came time to vote to close the merger, investors withdrew about 94% of the capital they had helped raise. This leaves BuzzFeed with $16 million, and another $150 million in convertible note financing.
What It Means
BuzzFeed has been on an acquisition spree since last year, adding HuffPost and Complex Networks to its portfolio. CEO Jonah Peretti seems focused on continuing this trend as the company transitions into a public entity.
It’s still early days for BZFD and the company is worth watching, though it should absolutely be through a lens of caution.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
