Digital media companies disagree on the future as the SPAC market falters

The digital media industry has reached a strategic crossroads.

Earlier this year, Special Purpose Acquisition Vehicles (SPACs) seemed like the long-awaited savior of digital media companies. BuzzFeed, Vice, Bustle Digital Group and others with venture capital had a plan to pay back investors with publicly traded stocks. Some of the biggest players would go public first, and those companies would then bring together smaller peers and pay with equity to get deals done. The end result would be a handful of larger digital media entities with enough global scale to survive.

But when the Securities and Exchange Commission cracked down on SPAC accounting practices in April, the booming market nearly came to a halt. In the first quarter, an average of 89 new SPACs were issued per month, according to Bespoke Investment Group. From April to the end of August, issuance dropped to an average of less than 10 per month.

While issuance has plummeted, the remaining SPACs are aggressively chasing deals. July had the second highest month of SPAC transactions ever registered.

Still, the recent performance of deals that have already been completed has been mediocre. Total space prices are at their lowest level since late 2020, Bespoke said. This affects SPACs that have not yet found targets. Of the 426 post-IPO SPACs that haven’t announced a deal yet, the average is trading 31 basis points below the IPO price, Bespoke said. In other words, investors assume that target companies will become increasingly undesirable.

This confused market, with many SPACs still looking for deals, very few new SPACs forming and a clear skepticism permeating transactions, has led some digital media companies to cling to the SPAC dream, while others are the blank check companies. reject it as just a fad.

There are currently three broad camps among digital media executives: SPAC believers, SPAC considerators, and SPAC rejecters.

The first group continues to believe that SPACs are the best way forward. Digital media entities provide steady growth, reliable revenue and are not as imaginative with projections as some of the companies that led to the SPAC crisis, said Bryan Goldberg, Chief Executive Officer at Bustle Digital Group.

“Broadly speaking, the SPAC mania has gone sideways, but so has the digital media world,” Goldberg says. “There has been a shift from growth to value. That should help the founders of digital media. What Wall Street normally sees as a bargain can be an attractive multiple for media CEOs.”

Bustle plans to pursue a SPAC later this year or early next year, Goldberg said.

Last week, Forbes announced it had reached an agreement to go public through SPAC after reaching a deal at an implied valuation of $630 million with the blank check entity Magnum Opus Acquisition. The same day Forbes announced its deal, Axel Springer agreed to pay about $1 billion for Politico, another digital media company.

Group Nine, owner of digital brands such as NowThis, Thrillist, The Dodo and PopSugar, has already launched a SPAC who will use it to make itself public, but only after it finds a merger partner or partners to increase the size of the company.

Group Nine’s SPAC, which went public in January, has an extra layer of complexity because it involves merging a target with an existing company, rather than just going public through an empty barrel. Groep Nine has spent the whole year scouting targets and has held talks with dozens of companies, according to acquaintances. Finding the right cultural and financial fit, with CEOs willing to work together, has stalled negotiations with several companies, the people said. Still, Group Nine expects to announce a deal soon, according to a person familiar with the matter. A spokeswoman for Group Nine declined to comment.

Vice Media Groups efforts to go public through SPAC have stalled as so-called PIPE (private investment in public equity) investors rebel against the company’s valuation, according to people familiar with the matter. While Vice hasn’t given up hope for a SPAC yet, it doesn’t currently have a specific timeline to go public, the people said. A deputy spokesperson declined to comment.

Axios, the digital news site which pulled out of talks to be acquired by Axel Springer in July, and Penske Media Group, which owns publications such as “Variety,” “Rolling Stone” and “Hollywood Reporter,” are among companies not pursuing SPACs, according to people familiar with the matter.

If the skepticism of SPACs in the industry grows, the grand scheme to consolidate and survive as publicly traded entities may collapse. SPAC Pax Romana from January May much resemble that of the Roman Empire.

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