|Possible short squeeze in 890 5th Avenue Partners, Inc. (stock symbol: ENFA), which approved its merger with BuzzFeed today. Huge redemptions, very low float. ENFA was up $2.51 in afterhours trading to $12.41.|
Some background on the deal: Media Industries: Newspapers, TV, Radio, Movies, Online Message Board - Msg: 33598223 (siliconinvestor.com)
BuzzFeed Suffers Wave of SPAC Investor Withdrawals Before Going Public
Digital-media outlet is raising about $16 million in its public listing; it is also raising $150 million in convertible debt
By Benjamin Mullin and Amrith Ramkumar
Wall Street Journal
Updated Dec. 2, 2021 7:15 pm ET
BuzzFeed Inc. will raise roughly $16 million from its public listing, after the blank-check company it is merging with suffered a wave of investor withdrawals, according to a securities filing and people familiar with the situation.
BuzzFeed in June announced plans to go public through a merger with 890 5th Avenue Partners Inc., a special-purpose acquisition company, or SPAC. Also called a blank-check company, a SPAC raises money and lists on a stock exchange with the sole intent of merging with a private firm to take it public.
About 94% of the $287.5 million the SPAC raised has been withdrawn by investors, leaving the digital-media outlet with the remainder, according to the securities filing.
BuzzFeed also raised $150 million in convertible note financing as part of the SPAC deal.
The SPAC’s investors approved the deal Thursday and BuzzFeed is expected to begin trading as a public company on Monday, the securities filing said.
The reduced cash proceeds could put pressure on BuzzFeed’s balance sheet. The company has previously said the merger would put it in position to pursue acquisitions and bring in high-quality executives. The deal is financing the acquisition of Complex Networks Inc., a digital publisher that specializes in streetwear, music and pop culture. BuzzFeed agreed to acquire HuffPost last year. BuzzFeed projected robust revenue growth when it announced the SPAC deal, saying sales would rise about 25% annually through 2024.
BuzzFeed said last month that it generated revenue of $90.1 million in the third quarter, a 20% increase over the year-earlier quarter, thanks to a 39% increase in advertising sales. The company said it lost $3.6 million for the quarter.
SPAC mergers have exploded, in part because the company going public can make business projections that aren’t allowed in traditional initial public offerings.
Many other companies that have pursued SPAC deals have suffered high withdrawals in recent months amid a share-price slump for startups that go public this way.
Since investors in SPACs don’t know what type of deal the SPAC will do, they are allowed to withdraw their money before mergers are completed.
Since the end of July, the average SPAC has lost about 60% of its money before its deal goes through, up from roughly 25% in the first seven months of the year, data from SPAC Research show.
Low share prices often incentivize withdrawals. Like many other blank-check firms, the BuzzFeed SPAC has been trading below its listing price for months.
Unionized employees at BuzzFeed’s news unit staged a walkout on Thursday, saying the company has been unwilling to agree to terms including a salary floor of $50,000 for employees.
BuzzFeed clashed with its largest investor, NBCUniversal, about the SPAC deal and granted the unit of Comcast Corp. concessions before it went through, The Wall Street Journal reported.
To win over NBCUniversal, BuzzFeed Chief Executive Jonah Peretti agreed to set aside 1.2 million shares of BuzzFeed stock, some of which would be granted to NBCUniversal if the shares stay below $12.50. The stock has been trading at less than $10 for most of the last several months.
Only a small percentage of BuzzFeed shares will be available for trading in the public market, as a result of the SPAC investor withdrawals and the fact that some existing stakeholders in the company are prohibited from selling shares for several months, one of the people familiar with the situation said.
Small trading floats can drive outsize moves in the share price because it doesn’t take much buying or selling to move the stock.
A person familiar with BuzzFeed’s strategy said that the investor withdrawals were expected and won’t affect the company’s plans.
BuzzFeed is among several digital-media companies that have turned to mergers and acquisitions for growth to combat the digital-advertising dominance of Alphabet Inc.’s Google and Meta Platforms Inc., formerly Facebook. Vice Media Group earlier this year scrapped a plan to go public through a SPAC, opting instead to raise financing and continue operating privately.
Write to Benjamin Mullin at Benjamin.Mullin@wsj.com and Amrith Ramkumar at firstname.lastname@example.org
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Appeared in the December 3, 2021, print edition as 'BuzzFeed SPAC Stung by Waves of Outflows.'
BuzzFeed Suffers Wave of SPAC Investor Withdrawals Before Going Public - WSJ