Media stocks showed signs of growth and were up on June 6. But this wasn’t the case for BuzzFeed. The New York-based Internet media, news, and entertainment company saw its stock plunge that same day as insiders dumped stock, causing the company to see a stock crashes of 40 percent in a single day
BuzzFeed, which was founded in 2006, had its company’s market cap fall below $315 million. The company is now worth about $300 million, according to Yahoo Finance. This is drastically below its recent IPO price of $1.5 billion.
Prior to June 6, the company had been on an upswing. In 2011, AOL bought the Huffington Post for $315 million, the New York Times reported. In 2015, Verizon acquired AOL owner HuffPo for about $4.4 billion and combined it with Yahoo, which it acquired in 2017 for $4.5 billion. BuzzFeed later bought HuffPost from Verizon in 2020.
So why did BuzzFeed see its stop plunge on June 6? According to one analyst, the company’s lock up agreements expired. A lock-up agreement is a contractual provision preventing insiders of a company from selling their shares for a specified period of time, according to Investopedia. Once BuzzFeed’s lock up agreements expired, shareholders could sell.
Another reason is that the company has many “non-traditional” investors.
After Buzzfeed went public via a SPAC merger in December, things started to get shaky for the company financially. In its first earnings call post-IPO, it slashed its workforce, called for buyouts in its news division, and three top editors resigned.
A SPAC, or special purpose acquisition company, defines an entity with no commercial operations that completes an initial public offering (IPO). After becoming a public company, the SPAC then acquires, or usually merges with, an existing private company, taking it public, defines The Motley Fool. BuzzFeed went public through a merger with 890 5th Avenue Partners Inc., a SPAC.
One analyst who tracks BuzzFeed and asked to be unnamed told Business Insider its latest stock drop was due to expired lock up agreements. Many Buzzfeed’s shareholders who bought stock in the company before it went public saw the agreements expired early this June. And they took the opportunity to dump their stock.
Also, said the analyst, BuzzFeed is “unique” because it has a “heavy concentration” of what they called “non-traditional” investors, such as publishing companies.
“This was the first and biggest lockup to expire,” the analyst added.
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Before the stock dive, on May 16, BuzzFeed announced financial results for the quarter ended March 31, 2022. Its Q1 revenue grew 26 percent year-over-year to $92 million, driven by promising double-digit growth in content revenue, Yahoo reported.
“I’m incredibly proud of all that our team accomplished in the first quarter,” said Jonah Peretti, BuzzFeed Founder & CEO, in a statement. “We completed the unification of the sales, business, and admin teams across BuzzFeed and Complex Networks demonstrated agility across our editorial, video, and news teams in serving the ever-evolving audience and consumer preferences, and delivered first quarter Revenue and Adjusted EBITDA in line with the outlook that we shared in March.”