BuzzFeed is divesting its assets. Now it should go private, experts say

Digital media company BuzzFeed successfully sold its food property, First We Feast, to a consortium of investors Thursday morning for $82.5 million, resolving the issue. short-term financial crisis it was facing.

But the spinoff leaves BuzzFeed facing an uncertain future.

The divestiture specifically highlights HuffPost – the latest acquired asset in the BuzzFeed portfolio – and the type of role it could play for the company in the future.

It also raises the question of whether BuzzFeed should remain a publicly traded company. The publisher has shed several of its holdings and is now a significantly smaller company than when it entered the public markets.

“This is the unraveling of their entire thesis to make it public,” said media analyst Brian Morrissey. “Their premise was that they were going to consolidate and become the industry’s leading digital publishing company, and that clearly didn’t work. »

BuzzFeed did not respond to a request for comment.

Private or public

BuzzFeed joined the public markets in December 2021 through a merger with a specialist acquisition company. As part of the deal, it also acquired Complex Networks for $198 million in cash.

Three years later, BuzzFeed remains a public company, but it no longer owns Complex or First We Feast.

Its stock, whose price was artificially boosted in May through a reverse split, is trading at about $4 per share, down from its initial IPO of $10. The situation made BuzzFeed a considerably smaller company than it was when it went public, with a total market capitalization of $153 million.

As such, it doesn’t make sense for it to remain publicly traded, especially given the additional operating costs associated with public compliance, according to JEGI Clarity CEO Bob Berstein.

“It’s not sustainable,” Berstein said. “They’re never going to be a big company, and they tried the acquisition route, and it didn’t work.”

Sam Thompson, founding partner of venture capital firm Progress Ventures, echoed this idea.

“If I were them, I think they would be better as a private company,” Thompson said.

This leaves BuzzFeed with the dilemma of finding a partner to make it private.

It’s possible that the company found a buyer to take it private and that the sale of First We Feast was the first step in a larger plan, according to Thompson and Berstein. The spin-off significantly cleans up BuzzFeed’s balance sheet, making it a more attractive acquisition.

But private equity has largely deteriorated in the digital media sector, leaving the pool of potential suitors small, according to a mergers and acquisitions analyst who asked to remain anonymous. It could find interested buyers from a hybrid capital fund, like HPS Partners, or from a content network like Taboola or ZergNet.

The uncertain future of HuffPost

If the company were to consider a return to private ownership, it might also reevaluate the role HuffPost plays in its business, according to the four sources.

The BuzzFeed portfolio now contains just two owned-and-operated titles: BuzzFeed and HuffPost, which BuzzFeed acquired in November 2020 for an undisclosed price. BuzzFeed also owns the Tasty recipe franchise.

The company’s financial maneuvers over the past year…complex sale and First We Feast – suggests he’s more than comfortable with paring down his assets.

And BuzzFeed has also signaled that its future lies in a direction that may not align with HuffPost’s.

Last year, the company began using generative artificial intelligence to create content at a lower cost, which runs counter to HuffPost’s more traditional news-gathering operations. According to Matt Omer, BuzzFeed’s chief financial officer, the company has also named “high-margin technology revenue lines,” such as affiliate marketing and programmatic advertising, as key to its future.

By creating content with GenAI and then monetizing it with automated ads, BuzzFeed could operate profitably if it maintained an incredibly lean structure, according to Berstein. But this model is more difficult for HuffPost to implement, because its content production processes might be difficult to automate.

As a result, it’s possible that BuzzFeed will also consider divesting HuffPost and then finding a suitor to take it private and run it as a small but profitable business, according to Morrissey. Regardless of which path it takes, the company has given itself some breathing room with its recent sale, but it still has many tough decisions ahead of it.

“BuzzFeed is a brand that was built for a different time,” Morrissey said. “And when it does, change is almost impossible.”