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Vivek Ramaswamy got a lot of early attention as a US presidential candidate. But the biotech tycoon-turned-culture warrior could not turn the buzz into enough primary votes.
Now he has moved on to activist investing, targeting another one-time high flyer struggling to live up to the hype: BuzzFeed.
The viral content machine was the symbol of early 2010s digital media mania. It raised hundreds of millions of dollars in venture capital from the likes of Comcast. Today, it has an equity value of just $100mn.
Ramaswamy has taken a stake of just under a tenth, a pittance compared with his fortune totalling in the hundreds of millions of dollars. He has offered various ideas that come with campaign-style slogans: “BuzzFeed has lost its way”; “Requirement for success: Diversity of thought”; “Pursuit of truth”.
BuzzFeed itself points out that its shares have a dual-class structure that keeps control vested in co-founder Jonah Peretti. But like Elon Musk and Donald Trump before, Ramaswamy apparently sees continued social and political relevance through mass media. He correctly notes that the company has more than $100mn of convertible bonds that are coming due in December, while the BuzzFeed balance sheet has just $45mn of unrestricted cash at the moment.
A showdown between creditors and Peretti was fast approaching anyway. Ramaswamy, who is asking for three board seats, will now come first.
BuzzFeed went public through a Spac merger in 2021. It projected that it would have $1bn of revenue in 2024 and an ebitda margin of 25 per cent. Instead, it generated just $50mn of revenue and an ebitda loss in the first quarter.
BuzzFeed has closed its Pulitzer Prize-winning newsroom, BuzzFeed News. It has sold Complex, a pop culture hub it once bought for $300mn, for roughly a third of that. BuzzFeed generates revenue through advertising and commissions on products sold through its websites.
It still has internet destinations that generate tens of millions of regular views: BuzzFeed itself, food website Tasty and the interview/chicken wing phenomenon, Hot Ones. But even viral internet traffic does not generate enough unit economics to be worthwhile.
Peretti deserves blame. Still, he remains one of the pioneers in digital media and Ramaswamy’s criticisms do not betray any particular acumen on his part. At one point, Ramaswamy cited a hedge fund “pod” structure as a way forward for BuzzFeed.
Buzzfeed’s shares rallied on news of Ramaswamy’s stake. But so did its convertible bond, from 85 cents on the dollar to 95 cents, signalling strong hope that BuzzFeed will find a way to refinance or repay its debts by December.
The prospects for Ramaswamy and Peretti’s equity, ranking junior, look dicier.
sujeet.indap@ft.com
