3 theories on why Vivek Ramaswamy is buying up BuzzFeed
Maybe the media company is his answer to Truth Social?
If you asked me, like, eight months ago, what would be the funniest activist investment into a struggling public company, I think “Republican presidential candidate Vivek Ramaswamy making a strategic investment in BuzzFeed” would have been a top five answer.
This morning, we got to see that fantasy come to life, as former Republican presidential candidate Vivek Ramaswamy announced that he had taken an activist stake in BuzzFeed, acquiring 2.7 million shares between $1.47 and $2.51 per share, and call options representing an additional 210,000 shares with a $2 strike price.
The filing’s Purpose of Transaction states that, “The Reporting Person (Vivek) will seek to engage in a dialogue with the Issuer's Board of Directors (the "Board") and/or management about numerous operational and strategic opportunities to maximize shareholder value, including a shift in the Company's strategy.”
My question is, what strategic opportunity is Vivek considering at this point?
An timeline of the events that led us here:
June 2021: BuzzFeed announced that it was going public through a $1.5 billion reverse merger with a SPAC in June 2021, and it was acquiring Complex Networks for $300 million ($200 million in cash, and $100 million in BuzzFeed equity).
December 2021: Days before BuzzFeed went public, 94% of the SPAC’s sponsors redeemed their shares. In SPAC deals, investors can redeem their shares for $10 cash before the deal closes, leaving BuzzFeed with just $16 million in cash in the SPAC’s trust, as well as a $150 million convertible note that it raised to help fund the Complex acquisition.
April 2023: BuzzFeed shut down its BuzzFeed News arm, and the company laid off 180 employees.
June 2023: BuzzFeed received a delisting notice from Nasdaq, as its stock price was floundering below $1.
February 2024: BuzzFeed sold Complex for $108.6 million, or roughly one third of its purchase price, and used about $66 million of the cash to pay off a revolving credit facility and redeem a portion of its convertible notes due in 2026.
And, according to their Q1 earnings report released 9 days ago, BuzzFeed lost $27 million on $45 million in revenue. The outlook isn’t good!
Of course, these are rookie loss numbers for recently IPO’d media companies. Trump Media & Technology Group, the parent company of Donald Trump’s Truth Social platform, disclosed a net loss of over $327 million in Q1, on total revenue of $770,500.
I have three hypotheses:
Vivek has a plausible vision to return BuzzFeed to its former glory.
Vivek thinks he has a plausible vision to return BuzzFeed to its former glory, but the company is probably cooked.
After a poor finish in the Republican primaries, Vivek decided to emulate Trump to prepare for a 2028 run, and, as part of the decision, he found it necessary to, like Trump, own a large stake in a publicly traded media company.
Whatever the reason, Vivek’s purchase inspired investor confidence, with BuzzFeed finishing the day up 20%.
