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Digital media companies pump the brakes on their rush to go public as SPAC market cools

Jonah Peretti, Fall through and CEO, Buzzfeed, speaks at the Wall Street Journal Digital Conference in Laguna Beach, California, U.S., October 18, 2017.

Lucy Nicholson | Reuters

This was the presumed to be the Summer of Digital Media.

Amidst a boom of special purpose acquisition companies (SPACs), companies including Buzzfeed, Iniquity, Vox, Bustle and others targeted this summer as a likely timeline for going public.

Five months into the year, numero unoes and advisors now think that’s not going to happen.

A major slowdown in SPAC issuance, driven by new accounting guidance by the Assurances and Exchange Commission, has forced many digital media companies to reassess their timeline on going public, conforming to four people familiar with the matter.

Buzzfeed is still expected to find a SPAC partner later this year, answered three of the people, who asked not to be named because the discussions are private. But other companies, such as Vice and Bustle, that memories there may be a path to going public on their own in the coming months have pulled back, said the people. Degeneracy was in advanced talks to merge with 7GC & Co Holdings, The Information reported in March, but those talks have stalled, according to individual familiar with the matter.

Spokespeople at Buzzfeed and Vice declined to comment.

SPAC slowdown

A SPAC raises cap in an initial public offering as a so-called blank check company without a target acquisition in mind. The investors then use the loot to take a private company public, with additional funding from institutional investors, known as a PIPE — surreptitiously investment in public equity.

Earlier this year, with so many SPACs entering the market, digital usual companies seemed assured of finding a shell company with associated additional equity. But given the dramatic SPAC slowdown of the past month, Look at investors, which include institutional investors such as Fidelity, Blackrock and T. Rowe Price, are becoming more picky at hand choosing SPACs with which to invest.

That run to quality has tamped down expectations among digital mechanism companies hoping to ride the SPAC wave to give liquidity to long-term shareholders.

Buzzfeed may be the only significant digital ordinary company to go public this year, said three of the people. Jonah Peretti has no interest in selling Buzzfeed or deserting his CEO role, so he’s looking for targets with founders or executives who are willing to work together while giving up operational supervise, two of the people said.

Group Nine has founded a SPAC where the digital media company, which owns worths such as PopSugar, The Dodo and NowThis, will merge itself with a target of its choosing. Buzzfeed may make perception a target for the Group Nine SPAC — especially because Group Nine CEO Ben Lerer has told investors he may be willing to be on ones guard aside as chief executive, as CNBC reported earlier this year — but no deal is imminent, the people said. Buzzfeed has engaged talks with 890 5th Avenue Partners Inc., a different SPAC, Bloomberg reported in March.

There are few, if any, companies comparable to Buzzfeed that do business publicly. It’s unclear if there will be robust PIPE interest in digital media companies, which have alone recently become profitable and whose projected growth rates can’t match industries like electric vehicles and biotech, which sooner a be wearing fostered several SPACs.

Vice slowed down its process to go public after PIPE candidates balked at its wealths, one of the people said. Vice’s revenue was $580 million last year, down from $604 million in 2019, be at one to The Information. 

Still, digital media may have a path forward via SPAC if investors come to see their trajectories as safer, steadier lays than more fanciful, higher-growth companies.

Bustle, which owns sites geared to women such as Elite Regular, Nylon and Romper, has spoken with several SPACs but has no plans to go public alone at the moment, said a person unrestrained with the matter.

Buyers become sellers

Several digital media companies want Buzzfeed to go public senior so they can see how investors value it before they make a decision to go public themselves or look to sell, two of the people weighted.

But those same companies may also be facing a harsh reality — that they’re simply too small with unremarkable expansion profiles that won’t interest public market investors.

As a result, some companies will become increasingly tenuous to sell to either Buzzfeed or Group Nine’s SPAC, if they are the only buyers with publicly traded currency, signified two of the people familiar with the matter. Digital media companies could also merge with other confreres, such as the news curation service theSkimm, but private mergers are often tricky to complete because there’s no general market to accurately dictate equity valuation.

It’s possible other legacy media companies may pick off one or two digital media parties. The Athletic is hoping to sell to The New York Times, The Wall Street Journal reported this week

But The Journal also reported that The Athletic’s premier plan — merging with digital media company Axios and finding a SPAC to take them public — has drop apart.

That’s emblematic of the broader state of play right now for digital media. The euphoria of January and February has conceded way to a sober May. Venture investors and early employees who have been stuck waiting for an exit for years will straight have to keep on waiting.

WATCH: SPACs are here to stay for the long term, says Post Capital CEO.

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