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· Posted on
February 21, 2024

BuzzFeed's IPO tanked and did they get that result on the quiz?

Recently, Buzzfeed decided to go public...but the company's share price plunged by 17% on its debut.

What's the key learning?

  • Recently, Buzzfeed decided to go public via a SPAC (special purpose acquisiton company)
  • But, 94% of shareholders in the SPAC company 'redeemed' their stake once they found out it was acquiring BuzzFeed
  • When an investor invests in a SPAC, they’re backing the SPAC's management team to merge with a high-quality company. But thankfully for investors, there is a returns policy if they don't like what they see.

Background: BuzzFeed is the media company that pioneered digital news and entertainment. They started back in 2006...and since then, have grown to be one of the biggest global media companies.

What happened: Recently, this crew decided to go public via a SPAC (special purpose acquisition company). Essentially, a 'shell' company that lists on the stock exchange...and then acquires a private company, which takes that company public.

What else: Here's the juicy bit: 94% of shareholders in the SPAC company 'redeemed' their stake once they found out it was acquiring BuzzFeed. And maybe they had a point, with the company's share price plunging 17% on its debut.

So what's the key learning?

💡When an investor invests in a SPAC, they’re backing the SPAC's management team to merge with a high-quality company. But thankfully for investors, there is a returns policy if they don't like what they see.

💡SPACs typically sell shares in their blank cheque company for $10 a pop and then search for a suitable private company to buy. But in 2021, many SPACs are actually trading below that $10 price on sharemarkets, which means shareholders are losing cash before they have even merged with another company.

💡 So, the redemption rate has been higher this year. And with BuzzFeed shares trading as low as $8...we can see why shareholders pulled out.

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