How Former BuzzFeed Employees Missed Their Big Pay
In June, when BuzzFeed announced it would go public, seeking to aim for a $ 1.5 billion valuation, the company’s co-founder and CEO Jonah Peretti, Recount CNBC, “I think it really allows us to be the consolidator in the media space with this amazing platform that we’ve built, and now we can add more iconic brands.” Former employees, many of whom had worked for the company with low salaries in the media world, one day considering payments from tech startups, were excited to turn their long-standing equity into real money. A former employee told me that he knew at least one of the first employees who could make up to a million dollars. It was as close to a fairy tale as the modern media industry allows: the oppressed masses of list makers could finally rally to a searing media deal.
As it turned out, for many former employees, it was too good to be true. Last Monday, when BuzzFeed went public, many of them learned something alarming: They weren’t able to trade the stocks they had waited years to trade. They watched with dismay the course of action fall eleven percent on the first day of trading; As of Friday’s close, most were still unable to trade, and BuzzFeed stock was valued at $ 6.07, having fallen nearly forty percent in the first week of trading. Hopes for bargains, big and small, have been dashed. Some former employees are now asking whether they have been excluded from the business for incompetence or deliberately misled. And they raise questions about the structure that BuzzFeed uses to go public. Some of them are even investigating whether they could take legal action against their former employer. (A company spokesperson vigorously denied that any information was deliberately withheld from former employees.) In BuzzFeed Slack internal messages on Thursday, Peretti said he was “very upset” by this turn of events.
BuzzFeed’s announcement in June indicated that the company would go public with a special purpose acquisition company, or After-sales service. After-sales service are sometimes referred to as blank check companies. They raise funds from sponsors, investors willing to bet on an anonymous acquisition target, in order to buy a private company. And, because they typically allow companies to go public faster than a traditional IPO process, while still making profit projections that could turn out to be misleading– they have become a recent trend on Wall Street. “Every friend launches a SPAC”, a billionaire said to Time early 2021. In the spring, the SEC began examining whether After-sales service allowed companies to bypass certain financial disclosures; in December, the agency had opened an investigation in former President Donald Trump’s use of a After-sales service to start a conservative media business. Last week, SEC Chairman Gary Gensler expressed concern that “the investing public may not benefit from similar protections between traditional IPOs and PSPCs” and that “misaligned incentives and conflicts could enrich some parties to the detriment of others”.
Former BuzzFeed employees described a rushed process, which potentially left more room for human error than a traditional IPO. . In an email, BuzzFeed told former employees they would receive “step-by-step instructions within the next week or two of what will be needed.”
The following week, December 2, the the Wall Street newspaper reported that about ninety-four percent of the $ 287.5 million After-sales service had raised had been withdrawn by investors; BuzzFeed stock was trading below its listing price, and it’s not uncommon for these lately a After-sales service lose about sixty percent of their money before going public. When markets opened on December 6, former BuzzFeed employees contacted their brokerage houses to initiate trades, but later found out that the type of stocks they were holding, known as Class B , could not yet be listed on the stock exchange. That evening Continental, a stock transfer company BuzzFeed had hired to facilitate the After-sales service merger, sent an email informing the former employees that in order to exchange their Class B shares, they would have to convert them to Class A shares. In order to complete the process, which would take three to five business days, the former employees were informed that they had to print the email, sign it, scan it and resend it. “And obviously we’re all millennials and neither of us have a printer,” said a former employee.
On the night of December 7, after two days of trading, BuzzFeed sent an email to former employees reiterating the need to print and sign the email in order to proceed with the stock conversion. “For context, we learned only yesterday that holders of class B shares should take additional steps to convert their shares to class A,” one read. “We hope this information was provided in Continental’s initial cover letters.” (Continental did not respond to a request for comment.)
Current employees, some of whom have also experienced delays in their redemption attempts, raised the issue during an internal conversation at Slack on Thursday morning. An employee asked Peretti to remedy administrative delays that were preventing former employees from selling their shares. “All the problems seem to be [Continental], said Peretti. When asked why Class B shareholders weren’t informed sooner that they would need to initiate the conversion into Class A shares, Peretti said that BuzzFeed “expected the transfer agent facilitates these conversions very quickly and is very angry with them and pushes them hard to fix this problem.
An email circulating among former employees last week raised the question of whether they could have legal action. “It’s rotten and definitely slimy, but I didn’t understand if it’s illegal,” one person wrote. When asked if something illegal had happened, Matt Mittenthal, spokesperson for BuzzFeed, replied “of course not”. Mittenthall also noted that Peretti is barred from trading for periods of six months to three years.
Some former employees also seemed curious whether former BuzzFeed News editor-in-chief Ben Smith, who is currently the Time’ media columnist, had been able to sell his shares. Smith referred me to a spokesperson for Time, who did not say whether Smith was able to negotiate on Monday, but wrote in an email: “Ben intends to divest his holdings in BuzzFeed, in accordance with his agreement with the New York Times.”
Many former employees have taken to Twitter to express their frustration. Arianna Rebolini, former editor of BuzzFeed Books, wrote, “I can’t stop thinking about myself last week, so excited to be able to pay off my student loans 🤡🤡🤡🤡🤡🤡🤡🤡 which I could have done if I could have sold on Monday , the shares that I have owned for five years! Josh Fjelstad, former Creative Director of the Brand Content team, tweeted“Most of us, the first to take lower wages, especially people like me, who didn’t know how to negotiate wages. He added, “We were sold on the basis of two things: the culture and the stocks we issued would be worth it. “
Not all of the former employees chose to purchase their stock options when they left the company; those who decided to buy shares did so because they believed the company might perform well as a public offering, making the events of the past week all the more disappointing. “The people who behaved in the most responsible way – I think that’s why people are so crazy – both as a responsible investor and as someone who believed in BuzzFeed, the thing you would have done was to exercise your options, both as a vote of confidence in the business and to avoid taxes. And these are the people who fuck the most, ”said another former employee.