The day was chaotic: after gaining up to 53% at the start of the session, then falling by 17%, the action of the online media BuzzFeed ended at 8.56 dollars, on a hefty drop of 11%, Monday, December 6, for the first day of its listing in New York. BuzzFeed is thus valued 350 million dollars (310 million euros) at the end of a laborious march towards Wall Street. The media company, which also owns the Huffington Post and the cooking recipes site Tasty, announced in June its merger with a SPAC, a financial vehicle described by some as a “blank check”.
PSPCs are empty shells that go public, raise capital, at a price of $ 10 per share, and then give managers carte blanche to buy the target of their choice, which thus goes public without having to respect the usual cumbersome procedures. In return, PSPC investors have the right to have their stake refunded at their starting price if they are not satisfied with the choice of the company purchased. That’s what happened with SPAC 890 5th Avenue, which had raised $ 287.5 million to complete an acquisition. Since the announcement in June of its target – BuzzFeed – is the haemorrhage: investors have asked 94% to be reimbursed for their stake.
In fine, BuzzFeed, which claims 135 million unique visitors per month, has raised only $ 16 million in capital on the Nasdaq, to which must be added $ 150 million in bonds convertible into shares. These securities are remunerated in this specific case at a rate that can go up to 8.5%, depending on the Financial Times, which risks weighing on the company’s financial costs.
“This does not change our strategy”, told the FT Jonah Peretti, the group’s founding CEO, who used the deal to buy Complex Networks, a sports and entertainment site, for $ 300 million. “I am not an expert in PSPC, I just see PSPC as a means for us”, he added. Mr. Peretti, however, acknowledged on CNBC that he entered the SPAC market when it was ” very hot “ – “Even companies that weren’t very good companies were raising a lot of money with very high valuations” – and that this market has since become « glacial ».
By dint of buying anything at too high a cost, PSPCs collapsed on the stock market in April and investors pulled out. According to FT, PSPCs returned on average half of their capital in the third quarter, up from 10% at the start of 2021.
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BuzzFeed heckled for its IPO on the New York Stock Exchange