BuzzFeed Gets off to a Rough Start as a Public Company

Rivals Pay Close Attention to BuzzFeed’s Performance

BuzzFeed (BZFD) made its debut as a public company yesterday, but its performance was disappointing. The stock surged more than 35% early in the trading day only to fall sharply in the afternoon. BuzzFeed is the first major digital media company to go public via a SPAC deal. Rivals including Vice, Vox, Bustle, and Group Nine, which have mulled similar deals, are watching BuzzFeed closely to see how its stock fares.

The decline in BuzzFeed’s stock on its first day of trading is not the only sign it may face rough waters as a public company. BuzzFeed only plans to raise $16 million from its offering after 94% of the $287.5 million raised by the SPAC was withdrawn by investors.

BuzzFeed Wants to Beef Up

BuzzFeed has been around since 2006, gaining popularity among millennials thanks to its listicles and viral news posts. Over the years it began covering serious news, even winning a Pulitzer. BuzzFeed announced its SPAC deal in June, merging with 890 5th Avenue Partners to go public. SPACs have been growing in popularity over the past two years as they offer a quicker and easier way for startups to sell shares to the public.

BuzzFeed plans to use proceeds from the offering to buy more digital media companies and cement its leadership position in the market. The company sees an opportunity to scale by investing in advertising, commerce, and technology. In 2020 BuzzFeed had revenue of $321 million. It expects revenue to hit $654 million next year.

Fewer Shares Prompt Volatility

The volatility for BuzzFeed’s stock on its first day as a public company could be due to its smaller trading volume. With investors withdrawing money ahead of its public debut and existing company shareholders forced to wait a few months before selling their shares, only a small portion of BuzzFeed’s shares could be traded. Smaller trading volumes can prompt more volatility. Because BuzzFeed’s stock fluctuated so significantly, trading was halted twice yesterday.

BuzzFeed is the first digital media company to test the public markets. It is betting investors have an appetite for a different type of media company. Rivals are paying close attention. If BuzzFeed is able to be successful as a public company after a difficult first day, other digital media companies could follow suit.

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