March 2, 2024

Cheerier times.
Photo: Bennett Raglin/Getty Images for BuzzFeed Inc.

In early 2021, BuzzFeed’s CEO, Jonah Peretti, had a problem. He wanted to take the digital media company — one of the defining players of the internet’s past 15 years — public through a Special Purpose Acquisition Company, or SPAC. At the time, there was a SPAC craze on Wall Street, and the BuzzFeed deal was, at one point, slated to value the company at $1.5 billion while raising around $290 million in cash from investors. Bankers were hustling companies through these IPO-like mergers — a quick and relatively easy way to get billion-dollar-plus valuations (at least temporarily), all with less scrutiny from regulators or skeptical investors. (If this sounds to you like it would make for some bad outcomes, you’d be right.)

To get that kind of valuation though, the company needed to be bigger, reaching more eyeballs and offering a larger scale to advertisers. Or as Peretti told the New York Times in 2018, “A bigger digital media company” would “would probably be able to get paid more money.” In late 2020, BuzzFeed bought HuffPost. In June of 2021, Peretti made an even bigger move by announcing the acquisition of Complex, a site for rap nerds and sneakerheads, for $300 million. He said that the Complex audience “skews more male and more diverse than BuzzFeed,” and “will make our company stronger.” But to complete the deal, Buzzfeed needed to borrow money — about $150 million altogether. A handful of hedge funds provided the credit as part of an arrangement that essentially gave Peretti more than three years to figure out a way to make it all work. The bill would come due in late 2024.

BuzzFeed — once a media-industry success story, a shining example of the social internet in action — now faces a very uncertain future. As a public company, almost nothing has gone to plan: The SPAC cash dwindled from almost $290 million to about $16 million; the social-media networks that BuzzFeed relied on for a large share of its traffic pivoted to different kinds of content; investors fled, driving down the company’s stock price by 98 percent and its overall market value to a tiny $37 million.

But there may be no bigger existential issue for the company than the debt it used to complete its Complex deal. The IOUs are so expensive that Peretti has been left with only difficult options to keep the company afloat. “This is debt, and anytime you’ve gotten debt on the books, you got to pay your bills,” said Jacob Donnelly, an analyst who recently pointed out these debt problems on his site, A Media Operator. “So that is where it starts to become questionable, and that’s where all their scenarios start to become dire.”

Corporate debt is all about the details, and the money that BuzzFeed borrowed came with a lot of catches — few of them likely to play out in the company’s favor. The bonds are what’s known as convertible, which means that, if the company’s stock is trading above a given price — $12.50 in this case — at the time the bonds mature, they can be converted into shares with no repayment of the principal required. Unfortunately for Buzzfeed, with shares now trading at 26 cents, that scenario is functionally out of play. The bonds also pay the holders 8.5 percent a year and are redeemable for slightly more than the original loans — pushing the whole outstanding debt from the Complex deal up to roughly $200 million. This amount, as it stands, is due December 3.

BuzzFeed does not have this kind of money. The company holds $42 million in cash, according to its last quarterly report. On top of that, it carries $33.8 million in other debts. In a situation like this, a Wall Street banker would likely come in and tell BuzzFeed that it needs to start selling off its assets. To some extent, that is happening. The Information reported last week that BuzzFeed is selling a significant portion of the Complex properties for more than $100 million — but that is about $50 million shy of what Peretti was hoping for. (Buzzfeed seems to be holding onto Hot Ones, the talk show where celebrities like Jennifer Lawrence have famously started crying while eating hot wings, and First We Feast, the show’s parent site.) That would get Peretti close to what he needs — but how he would find enough money to keep the rest of his company intact and operating is an open question. “From a business standpoint, it does make sense why they bought Complex — but I think they overpaid for it,” one banker who’s met with the company before said.

How can they get out of this? It’s not clear that Peretti has settled on a plan yet. The company already jettisoned its award-winning news division. Last March, Marcela Martin, then Buzzfeed’s president, touted its AI-generated quizzes as a way to make money, citing a partnership with “Scotts Miracle-Gro that uses AI to identify your plant’s soulmate.” (To date, AI quizzes haven’t changed the big picture.) During its second-quarter earnings call, Peretti compared himself to a baker who could not sell his wares: “I feel like we’ve figured out how to make some good cakes, but we still have to build out the bakery that can scale this and make more content experiences like this widely distributed across our network.” Its third-quarter earning report was rough. Time spent on its sites was down 19 percent. BuzzFeed also saw a net loss of almost $14 million in the quarter, with advertising and content revenue down by roughly a third to less than $59 million.

Peretti’s “most straightforward” remaining option, according to Donnelly, is probably to keep selling off assets and to jettison his SPAC-era growth plans. HuffPost, First We Feast, and Hot Ones could, in theory, all be up for grabs. BuzzFeed also owns Tasty.co, a successful recipe-and-food site. But selling off hyperspecific brands like those can actually end up weakening BuzzFeed even more in the long run, said Donnelly. “The big mistake that so many media companies have made is they didn’t have a defined niche,” he said. Another option could be selling off BuzzFeed’s ad network, potentially valuable to another media company.

Another possibility here could see BuzzFeed taken over by a very different kind of investor. To a large private-equity company, BuzzFeed’s mounting losses could actually be attractive, said Craig Greiwe, the chief strategy officer for GoDigital, which made a run for Vice last year. “A company that’s shredding money still has value, but not the kind that anyone in news or journalism is thinking about,” he said. If BuzzFeed lost money as part of a larger conglomerate, those net operating losses could turn into tax write-offs for the parent company, he said: “The inherited company is just a tax shelter, not a news operation.”

A spokeswoman for BuzzFeed declined to comment. On the quarterly earnings calls, though, BuzzFeed’s executives acknowledged that the internet has changed, that Facebook no longer drives traffic and they’re now competing with juggernauts like TikTok. The company has tried to grow a “creator network” of about 180 freelancers, Martin said in the spring, about the time that its news division shuttered. (The network is up to 227 creators as of December, according to figures provided by a spokeswoman after this story first ran.) One BuzzFeed employee familiar with their internal strategy said that the company is trying to entice creators to stay off competing platforms and on their own sites. Still, it’s not clear how it will once again become an internet destination by copying the tech companies that supplanted it. What remains is financial engineering. The worst-case scenario, however unlikely, is that BuzzFeed defaults on its obligations, goes into bankruptcy protection and then tries to dig itself out. (If that sounds familiar, that’s because Vice has been going through this process.)

Another option for Peretti is to take the company private again. This would mean buying out shareholders, in addition to paying off creditors. But since BuzzFeed’s stock is worth so little now, it wouldn’t be that much more expensive. “It doesn’t make sense for them to be public with a $30 million market cap,” said the banker who has met with BuzzFeed.

Donnelly thinks BuzzFeed might try to negotiate with its creditors and get an extension to pay back the debt, even though that would likely pile more IOUs onto the company. “The dream that BuzzFeed had by going public and buying Complex and, I imagine, buying other things — I think that dream is dead,” Donnelly said. “At this point, you’re managing a much, much, much smaller business.”

This story was updated to correct the amount of BuzzFeed’s other outstanding debts, and to clarify when the Complex acquisition was announced. It had also been updated to show that the company’s creator network has grown to 227 as of December, according to data provided by BuzzFeed after the story first ran.