How the August jobs report could affect your portfolio

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While issuance has plummeted, remaining SPACs are aggressively hunting for deals. July had the second-highest month of SPAC transactions ever on record.

Still, the recent performance of already-completed deals has been lackluster. Prices for the overall space are at the lowest levels since late 2020, said Bespoke. This is affecting SPACs that haven’t found targets yet. Of the 426 post-IPO SPACs which have not yet announced a deal, the average is trading 31 basis points below its IPO price, said Bespoke. In other words, investors are assuming that target companies will be increasingly undesirable.

This confused market, with many SPACs still hunting for deals but very few new SPACs forming and a clear skepticism pervading transactions, has caused some digital media companies to hang on to the SPAC dream while others are rejecting the blank-check companies as merely a fad.

There are three broad camps among digital media executives right now: SPAC believers, SPAC considerers, and SPAC rejecters.

SPAC Believers: Buzzfeed, Forbes, Bustle, Group Nine

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

“Broadly speaking, SPAC mania has gone sideways, but that doesn’t apply to the digital media world,” said Goldberg. “There’s been a shift from growth to value. That should help digital media founders. What Wall Street normally considers a bargain may be an attractive multiple to media CEOs.”

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

This past week, Forbes announced it had reached an agreement to go public via SPAC after reaching a deal at an implied $630 million valuation 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.

While that $1 billion exit may seem routine to many large institutional investors, it’s meaningful to digital media founders. Very few companies in the industry have sold at a multiple as high as 5x revenue, Goldberg noted. Politico generates about $200 million in annual revenue. That’s a bullish sign for an industry that’s come back to life after pandemic quarantines in 2020 briefly rocked advertising revenues.

BuzzFeed has also already found a SPAC partner, though, like Forbes, it hasn’t yet started trading publicly. BuzzFeed in June agreed to merge with 890 Fifth Avenue Partners at a $1.5 billion valuation. Chief Executive Officer Jonah Peretti said publicly he expects BuzzFeed to be an aggressive acquirer of other digital media companies — providing another off-ramp for founders who may feel uneasy about pursuing a SPAC, themselves.

Group Nine, which owns digital brands such as NowThis, Thrillist, The Dodo and PopSugar, has already launched a SPAC that it will use to take itself public — but only after it finds a merger partner or partners to bulk up the size of the company.

Leisure and hospitality jobs, which had been the primary driver of overall gains at 350,000 per month for the past six months, stalled in August as the unemployment rate in the industry ticked higher to 9.1%.

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