Brendan McDermid/Reuters
- Digital media outlet BuzzFeed began trading on Monday following its SPAC merger.
- BuzzFeed shares initially surged but then slumped as much as 31%.
- The company saw a wave of investor withdrawals before it went public, the Wall Street Journal reported.
Shares of BuzzFeed soared — and then sunk — Monday after the digital media company went public in a merger with a special purpose acquisition company.
The stock, trading under the ticker "BZFD," briefly surged as much as 20% before plunging as much as 31% in its debut. The shares ultimately closed the session about 11% lower at $8.56. The digital media company merged with SPAC 890 Fifth Avenue Partners.
The deal, announced in June, initially valued the company at about $1.5 billion and gave it a war chest of cash to chase acquisitions, like youth-focused digital publisher Complex Networks, which it plans to buy for $300 million. BuzzFeed also agreed to buy HuffPost last year.
Before going public, though, about 94% of the approximate $288 million raised by the SPAC had been withdrawn by investors in a wave of redemptions, according to a report from the Wall Street Journal.
In an interview with CNBC, BuzzFeed Chief Executive Officer Jonah Peretti said he had anticipated high redemptions considering the company went public as the SPAC market went "ice cold."
"We structured a deal so that we knew we could get public and buy Complex regardless of the redemption levels," Peretti said.
"We entered a SPAC market that was very hot where companies that were not very good companies were raising very high valuations and raising a lot of cash," he added. "We have over half a billion in revenue; we're a real business that could have taken a traditional IPO path."
Nearly 600 companies have gone public via SPAC merger this year, more than double last year's volume and the highest on record, according to SPACinsider, which showed a grand total of $154 billion raised for the blank-check companies.
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