BuzzFeed was once on the vanguard of digital media companies that were going to leapfrog traditional publishers and change how people watched and read news and entertainment — an ambition that it struggled to fulfill.
The company hoped to regain some of its momentum this year by listing its shares on the stock exchange. But that debut, on Monday, was disappointing, underlining how hard it will be for digital media companies to become the giants that they aimed to be.
Not only did BuzzFeed’s stock, which trades under the ticker BZFD, close down 11 percent at $8.56 on its first day of trading after a brief early surge, the company also raised a lot less money than it had expected from the deal that put it on the stock market.
BuzzFeed’s management had placed a high priority on listing the company’s shares on a stock exchange. Executives argued that having publicly traded stock would allow the company to snap up other digital publishing businesses, attracting more readers and advertising revenue.
BuzzFeed’s business grew as it pioneered catchy ways — including listicles and quizzes — of attracting readers, and its news division won its first Pulitzer Prize this year. But it and other digital media businesses, which venture capital firms funded over the past decade, faced an increasingly tough advertising climate. At the same time, many of their early investors have been growing impatient and seeking to sell some or all of their stakes.
Going public could help address some of those pains, but it can also heap pressure on companies if they don’t meet the expectations of investors and analysts. And a stagnant or falling share price could make it next to impossible to go on a buying spree.
To go public, BuzzFeed merged with a special purpose acquisition company, or SPAC, a transaction that could have raised over $250 million to help finance acquisitions. But last week, the company revealed it had garnered only $16 million after a large number of shareholders in the acquisition company, 890 5th Avenue Partners, declined to participate in the merger and opted to recoup money they had invested. The company was able to borrow $150 million by selling convertible bonds — corporate bonds that can be exchanged for stock in the future at a certain price.
At Monday’s closing share price, BuzzFeed is worth just over $1.13 billion based on the number of shares the company estimates it has outstanding. That is about 50 percent more than Gannett, the publishing company that owns USA Today.
Many of the company’s shares are not available to trade because their owners are restricted from selling them or do not intend to sell them. That could make its share price volatile and move up or down a lot. Early on Monday, BuzzFeed’s stock was up around 50 percent before dropping sharply.
Executives at other digital media companies were closely watching BuzzFeed’s move onto the public market and will surely keep track of how it fares now that it has to reveal its financial results to the world every quarter.
Vice Media, the youth culture and news publisher, was in talks this year with an acquisition company, 7GC, to merge and go public, The New York Times reported. Vice had been on the hook for payments to the private equity giant TPG, one of its investors. But Vice put its plans to go public on hold, announcing in September that it had raised $135 million in investor funding, which would be used for “its growth initiatives” and for mergers and acquisitions.
A person familiar with the plans said Vice had decided against a deal with an acquisition company because many investors were much more skeptical about such transactions after regulators and financial experts raised questions about the credibility of companies that had gone public with a SPAC’s help.
Vox Media, which bought New York magazine and its websites in 2019, is still considering a possible SPAC merger, The Information reported last month. The company recently bought Punch, a cocktail website.
Bustle Digital Group plans to go public next year, Bryan Goldberg, its chief executive, said in an interview on Monday. The company, which publishes the women’s website Bustle, has been acquiring other outlets in recent years, including Gawker and Mic.
“Just the fact that BuzzFeed is out in the public markets is a milestone for the industry,” Mr. Goldberg said, speaking before share price dropped. “But the first hour of trading wasn’t just a positive surprise, it was a spit-out-your-coffee type of surprise.”
“BuzzFeed and all the other digital media companies have spent the last three years really improving our businesses and really figuring out how to create value for clients and for users,” Mr. Goldberg added. “And I think 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.”
Group Nine Media, which publishes PopSugar and Thrillist, formed its own SPAC last December, saying in a securities filing at the time that it intended to merge with similar companies.
BuzzFeed has already made some notable acquisitions. As part of its deal with 890 5th Avenue, it announced it was buying the sports and entertainment publisher Complex, adding to its purchase of HuffPost last year.
“I don’t care how we go public,” Jonah Peretti, BuzzFeed’s chief executive, said in an interview on Friday. “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.”
And some analysts said BuzzFeed’s acquisition strategy had appeal. By grouping several publications together, BuzzFeed would be able to offer advertisers access to larger audiences.
“There’s definitely something to the idea of consolidation,” said Brian Wieser, global president of business intelligence at GroupM, the media investing arm of the ad company WPP. “It’s the reason why, going back to the old days, Time Inc. was a house of brands.”
In the first half of 2021, BuzzFeed had revenue of $162 million, up from $123 million a year earlier. In the same period, it had a loss of $12 million, a slight improvement on the $19 million it lost a year earlier.
For BuzzFeed’s former and current employees who have shares in the company, the trading debut offers some promise of financial gain, though many were confused about exactly how much they would benefit, one current staff member said. (Ben Smith, the former editor in chief of BuzzFeed News and now The Times’s media columnist, also holds stock options in BuzzFeed.)
And not all employees are happy. On Thursday, the day shareholders voted to take the company public, all 61 members of the BuzzFeed News union walked off the job to protest stalled contract negotiations.
On Monday, champagne was passed around BuzzFeed’s office, which has sat largely empty for nearly two years because of the pandemic. Employees were shown a video that presented different parts of the company as ingredients for a cake. It was filmed in the style of BuzzFeed’s popular Tasty food videos, with Tasty represented by flour, BuzzFeed as the sugar, BuzzFeed News as eggs, HuffPost as butter and Complex as hot sauce.