As Vice Media prepares to file for bankruptcy, how safe is Buzzfeed stock?

By:
on May 2, 2023
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  • Vice Media is preparing to file for bankruptcy this week.
  • The company has failed to find a buyer as it runs out of cash.
  • Buzzfeed could be at risk as its cash burn increases.

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Vice Media, once valued at over $5.7 billion is preparing to file for bankruptcy as soon as this week. According to the Wall Street Journal, the bankruptcy comes after the company struggled to find a buyer recently. So, how safe is Buzzfeed (NASDAQ: BZFD), a company that has become embattled recently?

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Vice Media to file for bankruptcy

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Vice Media is one of the best-known companies in the digital media industry. The firm owns other brands like Refinery29, Motherboard, and Vice TV. At its peak, the company was valued at over $5.7 billion, with investors including the likes of Comcast and Fortress Investments.

The digital media landscape is changing as growth slows and companies focus on other advertising formats. Many companies are focusing on the likes of TikTok, Instagram, and Facebook. As a result, the most successful media companies like the New York Times, Washington Post, and New Yorker have all embraced the subscription model.

Therefore, Vice Media struggled to find a buyer in a fire sale. As such, the company now hopes that it will go through an orderly bankruptcy that will see parts of its business sold to potential investors. Analysts believe that some media companies will be interested in acquiring the pieces.

How safe is Buzzfeed stock?

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With Vice Media collapsing, there are concerns about Buzzfeed, a company in the media business. Buzzfeed stock price has lost over 94% of its value since it went public in 2020. Once worth billions, the company now has a market cap of just $75 million. Buzzfeed is now a penny stock whose shares are trading at $0.55.

Just last month, Buzzfeed announced that it was shutting Buzzfeed News, an operation that had some of the best journalists in the US. The goal of that shutdown was to preserve cash as the company worked to implement a turnaround, as we wrote here.

Buzzfeed is facing the same challenges that Vice Media faced. With fears of a recession around, many companies are saving cash and not advertising enough. Also, there are concerns about the advertising landscape.

Buzzfeed’s finances are dwindling. The company had over $90.6 million in cash and short-term investments in 2020 and $55.8 million in the last report. Its total current assets have moved from $251 million to $198.6 million while current liabilities jumped to $122 million. Its annual losses have also increased, reaching $201 million in 2022.

Therefore, I believe that Buzzfeed stock price has become significantly cheap in the past few months. However, I recommend against catching a falling knife. Just ask investors who bought First Republic Bank and Credit Suisse before their collapse.

Correction

The original article noted that Vice Media had filed for bankruptcy. The title has been updated to show that the company is preparing to file for bankruptcy.

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