Grab 3X on BuzzFeed – And Even More with This New Trade
BuzzFeed may have gotten its start as the creator of the quizzes, pop-culture lists, and the “greatest of all time” fascination stories that live at the bottom of the websites we all visit.
But here’s the thing: those superfluous beginnings are now part of its past and the company is quickly emerging as one of the very top digital media brands among the Millennial and Gen-Z crowds – who’ve leapfrogged the Boomers to become the biggest combined population group in America today.
BuzzFeed is now a real-deal digital media company, with properties that include the Huffington Post, product lines that include kitchenware and partnerships that include the Lions Gate Entertainment Corp.
That’s all translating into zooming growth for the company – revenue will expand at a compound annual rate of 25% over the next five years – and a potentially great trade for us.
And this opportunity is due in large part to something I refer to as a “Pre-IPO” opportunity or, in the lexicon of finance, a special purpose acquisition company (SPAC).
Today, I want to give you a quick SPAC primer, who you want to focus on and what to ignore, and then give you a rundown on my BuzzFeed trade – thanks to a SPAC that IPO’d back in January.
This one has me excited – for a couple reasons.
First, we’re going to tackle this one in a way that gives you a shot at all the upside (and believe me, there’s a lot of upside potential here). And there’s a way to stroll away from the trade virtually unscathed if it doesn’t surge the way we want it to.
Second, and more important, I’m going to introduce you to a strategy that will bring you a steady stream of opportunities like this. And this strategy will let you invest in these pre-IPO deals – and trade them, as well.
A Blank Check … For Wealth
Let’s start by talking SPACs.
Although the actual deal flow is down year-over-year, the fact is that SPACs are suddenly making headlines again – both good and bad.
But I’ll let you in on a little secret: These pre-IPO ventures have the potential to make shrewd investors a nice pile of cash. And the pundits attempting to tear them down either don’t know how to play them in general – or don’t know the right ones to play.
And our BuzzFeed trade is one of them.
The premise of a SPAC is pretty simple. Typically, a group of dealmakers and investors get together (sometimes with buzz-creating/attention-getting celebrity sponsors in tow) and IPO a “blank-check company.” Instead of “starting” a business, the goal here is to buy one.
The cash raised by the stock offering goes into a kind of “escrow” account, where it collects interest and is kept safe while that blank-check firm goes hunting for a business to buy.
When a SPAC goes public, it sells “units” (not shares) – typically for $10 each. For each $10 investment, you get one common share – as well as a separate security that I refer to as a “pre-IPO right.”
Let me come back to that … because it’s a pretty big deal.
Let’s instead get down to the BuzzFeed trade.
The window to play BuzzFeed comes to us thanks to 890 5th Avenue Partners Inc. (ENFA), a SPAC that debuted at $10 a share back in January.
Just last month, 890 5th Avenue said it is merging with BuzzFeed in a deal that values the target company at $1.5 billion. When that happens – and the goal is to finish this in the fourth quarter – ENFA will change its ticker to BZFD and its corporate name to BuzzFeed.
BuzzFeed already has a deal in place to snag Complex Networks, a digital publisher that specializes in streetwear, music and pop culture – a perfect bolt-on property given the demographic it’s targeting.
Here’s how we’re going to play this.
Right now, ENFA shares are trading around $9.87 – so at a slight discount to their IPO price of $10.
The $287.5 million raised by the SPAC (28.75 million units at $10 each) was deposited into the protective trust account and is collecting interest.
What you may not know is, if the merger deal falls through, for any reason, and the SPAC shuts down, the money in the trust account goes back to the shareholders.
In other words, you’d get a “refund,” but we don’t think that will happen.
Instead, we believe BuzzFeed will keep adding to its digital-publishing muscle – and grow that projected 25% a year … or more … over the next five years.
That means you’re looking at something like a 3x gain in a very compressed time frame.
That’s how you build wealth.
And the story also gets better: There’s also a way to buy a SPAC that also gives you those “pre-IPO rights.”
It’s the “strategy” I was referring to earlier. And it’s a game plan that opens the door to all sorts of high-powered trading opportunities.
With this special strategy, you can use those pre-IPO rights to offset risk, to create arbitrage profits or as a trading vehicle themselves.
The fact is that I’ve got trades like those lined up for you.
And I want to tell you all about them right here.