Digital media company BuzzFeed (NASDAQ: BZFD) made its long-awaited debut on the stock market yesterday following a merger with a special-purpose acquisition company (SPAC). After a flurry of initial trading that saw the firm's value jump over 50%, it ended up closing down 11% to end a tumultuous first day as a publicly-traded company.
BuzzFeed is a digital media company that focuses on news and entertainment in particular. Starting out in 2006 with a focus on tracking viral content, the company gained a lot of traction for its pop-culture articles and offbeat online quizzes.
2011 saw the company put a huge focus on conventional long-form journalism. This has paid dividends, with numerous accolades won -- including a coveted Pulitzer Prize.
SPAC mergers have become an extremely popular way of taking a company public. However, increased scrutiny from the U.S. Securities and Exchange Commission (SEC) has certainly weighed on the SPAC market, especially with investigations ongoing into notable SPAC mergers such as Lucid Motors' recent deal.
In BuzzFeed's case, it suffered a massive withdrawal of funds from the blank-check company it was merging with only days before it planned to go public. Roughly 94% of the $287.5 million that had been raised got pulled from the company, leaving BuzzFeed with only $16 million as a result of the merger. This largely defeated the main point of a SPAC, which is gaining the capital raised by the shell company once you merge with it.
Investors, seeing this large-scale sell-off before the company's debut as a highly negative sign, stayed clear and the stock dropped as a result.
Much is left to be seen about BuzzFeed's true value on the stock market. Some major acquisitions, including HuffPost last year and the planned purchase of Complex Networks in the new year, certainly look set to intrigue investors. Projected sales increases of 25% annually through 2024 are also lofty targets that, if hit, would certainly warrant a closer look for potential shareholders.
However, until these projections become a reality it might be best to steer clear for now until BuzzFeed truly finds its feet on Wall Street after having the rug pulled from under it earlier in the week.
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