Back to Blog
Buzzfeed went public via SPAC (Special Purpose Acquisition Company) recently, and it did not go well for them. The stock initially shot up to almost 14 dollars a share before falling to right around 7 dollars a share. This was obviously not what they were hoping for. When a company goes public, they do it to raise money, and Buzzfeed is expected to only have raised 16 million dollars. Buzzfeed is currently trading at a market cap of around 225 million dollars which seems low for a company that brought in around 400 million dollars worth of revenue in 2020.
So why did Buzzfeed have such a bad first day as a public company? There are many different ideas out there. On the podcast MarketFoolery, which is owned by the Motley Fool, they theorized that this could be a sign that the SPAC wave is dead. They took it as investors may just not be interested in SPACs anymore. While this could be true, it could also be true that investors just aren't bullish on Buzzfeed as a company.
It's important to note that Buzzfeed went public while dealing with a staff walkout protest. This news could have made investors weary about buying into the company. Also, Buzzfeed as a company has launched plans to go into different revenue directions that many people don't believe will actually work. Buzzfeed is now trying to grow revenue by selling projects to other studios and making money that way. Vox recently published an article where they noted that there was a time where media companies were able to make money by having Facebook promote their content on their platform and getting millions of people seeing it that way, but now, it is known that Facebook is a competitor and not an ally for a lot of these media companies.
It is also important to note that Buzzfeed was valued at 1.5 billion dollars recently which is less than the 1.7 billion dollar valuation that they had in 2016. The fact that they fell in value over the last 5 years should be enough to cause any investor to pause while considering buying the stock.
We won't tell anyone if they should or should not invest in Buzzfeed, but this information should help one understand why the stock did not do well on opening day.
Follow us on social media down below.
Join our stock picker and have our stock picks sent directly to your inbox. Join at www.patreon.com/financebycwt.