Jonah Peretti, founder and CEO of Buzzfeed, speaks at the Wall Street Journal Digital Conference in Laguna Beach, California, USA, Oct. 18, 2017.
Lucy Nicholson | Reuters
This was the supposed summer of digital media.
Amid a boom of special purpose acquisition companies (SPACs), companies like Buzzfeed, Vice, Vox, Bustle and others had this summer as a likely timeline to go public.
Five months a year, executives and consultants now think that this will not happen.
A major delay in the issuance of SPAC, driven by new accounting guidelines from the Securities and Exchange Commission, has forced many digital media companies to reassess their timelines, according to four people familiar with the matter.
Buzzfeed is still expected to find a SPAC partner later this year, said three of the people, who asked not to be named because the discussions are private. But other companies, like Vice and Bustle, who thought there might be a way to go public on their own in the coming months, have pulled out, the people said. Vice was in advanced talks to merge with 7GC & Co Holdings, The Information reported in March, but those talks have stalled, according to people familiar with the case.
Spokespersons at Buzzfeed and Vice declined to comment.
A SPAC raises capital on an IPO as a so-called blank check company without an intended acquisition in mind. The investors then use the money to disclose a private company, with additional funding from institutional investors, known as a PIPE – private investment in public capital.
Earlier this year, when so many SPACs hit the market, digital media companies seemed confident to find a shell company with additional equity to match. But given SPAC’s dramatic slowdown over the past month, PIPE investors, including institutional investors such as Fidelity, Blackrock and T. Rowe Price, are becoming more choosy in choosing SPACs to invest with.
That quest for quality has lowered the expectations of digital media companies hoping to tap into the SPAC wave to provide liquidity to long-term shareholders.
Buzzfeed may be the only major digital media company to go public this year, three of the people said. Jonah Peretti has no interest in selling Buzzfeed or relinquishing his CEO role, so he seeks goals with founders or executives who are willing to collaborate while relinquishing operational control, two of the people said.
Group Nine has established a SPAC where the digital media company, which owns properties like PopSugar, The Dodo and NowThis, will merge itself with a target of its choice. Buzzfeed may be a logical target for the Group Nine SPAC – especially since Group Nine CEO Ben Lerer has told investors he may be willing to step aside as chief executive, as The Washington City Times reported earlier this year – but no deal is imminent. the people said. Buzzfeed has held talks with 890 5th Avenue Partners Inc., another SPAC, Bloomberg reported in March.
There are few, if any, companies comparable to Buzzfeed that trade publicly. It is unclear whether there will be strong PIPE interest in digital media companies, which have only recently become profitable and whose projected growth rates cannot match sectors such as electric vehicles and biotechnology, which have driven several SPACs.
Vice delayed the process of going public after PIPE candidates opposed the finances, one of the people said. Vice’s revenue was $ 580 million last year, compared to $ 604 million in 2019, according to The Information.
Still, digital media may have a path forward through SPAC if investors start to view their trajectories as safer, more stable bets than more fanciful, fast-growing companies.
“Major advertisers want to diversify,” said Bustle CEO Bryan Goldberg in January. “Now is a good time for digital media.”
Bustle, owner of sites targeting women such as Elite Daily, Nylon and Romper, has spoken to several SPACs but currently has no plans to go public on its own, said a person familiar with the matter.
Buyers become sellers
Several digital media companies want Buzzfeed to go public first so they can see how investors appreciate it before making a decision to go public or sell themselves, two of the people said.
But those same companies can also face a harsh reality: that they are simply too small with inconspicuous growth profiles that are of no interest to public market investors.
As a result, some companies will become increasingly desperate to sell to Buzzfeed or Group Nine’s SPAC, if they are the only buyers with a publicly traded currency, said two of those familiar with the matter. Digital media companies could also merge with other industry peers, such as the news manager the Skimm, but private mergers are often difficult to complete because there is no public market to accurately dictate stock valuation.
Other older media companies may choose one or two digital media companies. The Athletic hopes to sell to The New York Times, The Wall Street Journal reported this week
But The Journal also reported that The Athletic’s initial plan – to merge with digital media company Axios and find a SPAC to make them public – has fallen apart.
This is characteristic of the broader state of affairs for digital media at the moment. The euphoria of January and February has given way to a sober May. Venture investors and early workers who have been waiting for an exit for years will just have to wait.
WATCH: SPACs are here to stay for the long haul, says Post Capital’s CEO.