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: The company is rapidly emerging as one of the very top digital media brands among the Millennial and Gen-Z set. In the United States alone, McKinsey & Co. estimate this demographic packs a whopping $350 billion in spending power. That’s a fraction, albeit a big one, of the $2.6 trillion wielded by the Baby Boomers, but Gen-Z and Millennials have leapfrogged that demographic to become the biggest combined population group in America today.
Accordingly, BuzzFeed has become a real-deal digital media company, with properties like the Huffington Post that are popular with the under-40 crowd.
That’s all translating into explosive growth for the company – revenue will expand at an eye-popping compound annual rate of 25% over the next five years.
In other words, BuzzFeed is a fantastic opportunity for early investors, thanks in part to something I call “pre-IPO rights.”
This could bring investors three times their money in very short order. Here’s how…
Why SPACs Can Be Incredible
The opportunity here is, in the lexicon of finance, a special purpose acquisition company, or SPAC.
These “blank-check companies” 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.
We do – and Buzzfeed is one you definitely want to play.
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’s instead get down to the trade.
Here’s How to Play BuzzFeed for 3x the Money
The window to play BuzzFeed comes to us thanks to 890 5th Avenue Partners Inc. (NASDAQ: ENFA), a SPAC that debuted at $10 a share back in January.
Just last month, 890 5th Avenue said it’s 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 extremely lucrative demographic it’s targeting.
So here’s how to play it…
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.
Now, 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; investors would get a “refund.”
But I don’t think that’ll happen.
I 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 there’s no end in sight – it’s possible to do it again and again, on hundreds of potential opportunities.
See, there are more than 500 companies looking to go public right now, and there are ways to buy SPACs that can also get you those potentially lucrative “pre-IPO rights” I told you about. That’s the strategy I mentioned earlier; it can open the door to all kinds of high-powered trading opportunities. You can use them to offset risk, create arbitrage profits, or even use them as a trading vehicle themselves.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.