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BuzzFeed fell 39% in debut week, provides valuation benchmark for media

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Jonah Peretti is the BuzzFeed CEO. He stands in Times Square in front the Nasdaq Market site. This happens as BuzzFeed goes public with the merger of an acquisition company and a company for special purposes. It happened in New York City on December 6, 2021.

Spencer Platt | Getty Images

BuzzFeedIt fell 39% during its first week trading and closed at $6.07 per Share, a poor start for digital media companies’ prospects on the public markets.

Even though its valuation may be disappointing, Buzzfeed’s debut offers peers an opportunity to compare public market valuations.

BuzzFeed’s Chief Executive Officer Jonah Peretti stated that “digital media doesn’t really have competitors.” We are the only digital media outlet that can reach a Gen Z or millennial audience.

BuzzFeed may go public if its shares skyrocket. Peers like Vox Media and Vice Media will be able to take their share of the success. All four considered that routeearlier in the year with different degrees of seriousness. SPACs (special purpose acquisition companies) are created for special purposes. lost their investment appeal around AprilThe industry put a halt to plans for going public.

BuzzFeed failed, but it was a success. Investors who initially contributed $288 million to SPAC originally. pulled back 94% of it, instead of moving forwardAs BuzzFeed shareholders

Peretti stated that while we ended up speaking to many public market investors, they said they weren’t interested in investing in SPACs any more, but were still open to meeting with us, so we can get to know you better when you are public.

Bryan Goldberg CEO, Bustle Digital Group said that BuzzFeed’s key level is $15 per share. BuzzFeed would have a market capitalization of approximately $2.25billion if it traded at $15 per share. This is close to a four-fold trading multiple. BuzzFeed reported $161 Million in revenues in 2021’s first half. Complex Media, which earned $53,000,000 in its first six-months of operation, was also acquired by BuzzFeed earlier this year.

BuzzFeed could consolidate its position if they have confidence in their future prospects. BuzzFeed will require outsiders to believe in the equity, so it can be used as a viable currency for acquisitions. Goldberg stated that if BuzzFeed is able to maintain a revenue multiple of 4x, then sellers will feel they are getting an honest price.

Goldberg suggested that default should be 4x revenue. It may take up to six months for it to happen.

According to Goldberg, fourth-quarter digital advertising revenues won’t be very good. He said that disruptions in supply chains have resulted in a reduction of advertising spending. This could put pressure on BuzzFeed stock. He said that a six-month lockup for investors could lead to an increase in selling speed when investors are free.

Goldberg shared that she has an in-depth view of how digital advertising sales will be in the fourth quarter, and 2022. I think that digital advertising will have a difficult fourth quarter in 2021. However, I believe 2022 will be a clear sky.

Recalibration may still be helpful

BuzzFeed may not see a surge in its value but digital media companies can use it to provide a comparison for an industry without one. While Peers might not be able go public, BuzzFeed’s stability at any price will provide the industry with a measure of how valuable companies really are.

Goldberg stated that digital media suffered for five years from an absence of publicly traded companies.

According to sources familiar with the matter, BuzzFeed and Vox have been in talks for a number of mergers over that period. Having raised money at lofty valuations — $1 billion for Vox Media, $1.7 billion for BuzzFeedYou can also find out more about a whopping $5.7 billion for Vice Media — the companies need scale to prove to public investors and potential acquirers they can compete with Google and FacebookAdvertising dollars

Two factors have impeded industry consolidation: agreement on value and founder’s ego.

Setting valuations was a leap of faith without comparing them to the public markets. Vice Media has been the posterchild for inflated private valuation.Vice’s 2019 valuation was $3.6 billion. In 2019, Vice tried to become public but failed due to low interest from SPAC investors. A way to judge yourself is to not consider possible exit strategies. meaningless exerciseyou can say your house is worth $278 millionBut that doesn’t necessarily mean they will.

BuzzFeed may not be a perfect proxy for all digital media companies, but it is enough to provide an apples-to–apples comparison that private-to-private transactions are more possible.

This second issue is more difficult to solve, as the chief executives of most major digital media start ups want to consolidate, and not get sucked into conglomerates run by someone else.

BuzzFeed has announced that the company will start rolling out the industry now that it is public. According to sources familiar with the subject, the pace of consolidation will be determined by the personalities of the people in charge.

Jonah Peretti is the founder of Buzzfeed and its CEO; he also co-founded Huffington Post.

Courtesy of Ebru Yuldiz/NPR

People who spoke on condition of anonymity because they were not authorized to speak publicly about the opinions and expertise of major digital media companies in acquiring or integrating companies said that these people feel they can do it best.

Vox Media purchased New York Media, which was the owner New York Magazine. in Sept. 2019. Vice Media announced it bought Refinery29A few days later, it was $400 million. A week laterGroup Nine made the announcement for PopSugar. Bustle Media Group purchased a variety of media companies in the past, such as Gawker Media, Mic, Nylon and Flavorpill. CNBC heard from Goldberg that he intends to buy, and not sell.

BuzzFeed is for its own part. acquired HuffPost2020 bought Complex Networks for $300 millionAs part of the SPAC merger.

There are also a lot of new upstarts that may not be as cooperative. Such companies are Axios The InformationTheir venture-astute peers don’t have as many obligations to investors, so they can make steady subscription revenues. According to sources familiar with the matter, their founders don’t want acquisition offers based on their business models. Start-ups such as Punchbowl PuckIf they are able to sustain profitability via subscriber fees, then a small number of employees may not need to sell.

According to one executive in digital media, BuzzFeed “still has a lot haters,” he said. He asked to remain anonymous to avoid any retribution.

Many of these same rivals are also now rooting for BuzzFeed to succeed. There are many options for them if BuzzFeed shares go up and Wall Street wins.

Peretti stated, “I have heard this from other executives at the company: We are rooting for your success.”

Peretti will concentrate on building a company that is profitable and showing Wall Street how valuable digital media are if the shares fail to recover.

Goldberg will buy BuzzFeed shares in the meantime.

Goldberg declared, “I just bought an entire f—ton BuzzFeed shares at $6.00.” “If the price drops, I will back it up.”

WATCH: BuzzFeed CEO Jonah Peretti on SPAC merger

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