Shares of BuzzFeed went on a rollercoaster ride Tuesday amid the expiration of a ban preventing executives and major institutional investors from selling their shares.
BuzzFeed’s stock rose as much as 12% in midday trading, just one day after shares plummeted 41%, closing at $2.23 Monday.
The plunge was the worst percentage drop in BuzzFeed’s company’s short trading history, shrinking its market capitalization by more than three-quarters since it began trading as a public company in December.
At the time, BuzzFeed, which is known for an odd mix of viral videos, popular quizzes and news reporting, went public through a merger with special purpose acquisition company 890 5th Avenue. It began trading on Dec. 6, opening at $10.99 a share.
According to a filing with the Securities & Exchange Commission, a second lockup will expire on Dec. 3, which could also rock the company’s stock.
BuzzFeed did not comment on its stock volatility. A rep for the company told the Wall Street Journal on Monday that the stock decline was due to the lockup period, which expired on June 1.
He added that the company had very low “float” and few owners of its stock — making it sensitive to extreme fluctuations when major investors sell.
A source told The Post that volatility is expected to be “short-term,” however. The source added that the second lockup expiration will not likely impact the stock as greatly because “a much smaller number of shares” that will become eligible for sale
BuzzFeed’s largest shareholders include Comcast-owned NBCUniversal, venture capital firm New Enterprise Associates and media conglomerate Hearst, which operates magazines like Elle, Cosmopolitan and Esquire, according to an April filing.
NBCU, Hearst and New Enterprise Associates didn’t immediately respond to requests for comment.
It is typical for companies that go public to have a lockup agreement in place, which prevents insiders from selling their shares until the end of designated periods. The agreement is used to assure investors that there will not be a large block of shares coming to the market, which could impact the share price.
Likewise, it is typical for companies to see their stock price drop when the lockup expires. For instance, Facebook’s stock fell more than 6% in August 2012 as shares owned by early investors became available to trade.
BuzzFeed was one of the last digital media companies to go public via a SPAC, a move that was meant to fuel growth. In the last year, the market has cooled, though, amid waning demand and heightened financial scrutiny. Rivals like Forbes, Vice Media and Vox all scrapped their plans to go public through a SPAC in recent months.
BuzzFeed has grown its footprint via acquisitions of HuffPost and Complex Networks, and it looked to raise funds for future deals by going public. The company raised much less money than expected from its public listing amid weak demand from investors, the Journal reported in December.