On January 25, 2021, Paul Bernstein was quoted in CNBC and Forbes on several digital media companies that are considering going public via special-purpose acquisition vehicles (SPACs).
According to the articles, SPACs have given digital media companies a surprising lifeline that didn’t exist a year ago. The sudden burst of blank-check companies, backed by individuals, private equity firms, and strategic companies, has opened up an avenue to provide long-term investors with a way to monetize their investments.
Digital media companies have known for years that they need more scale to be viable counterweights to digital platforms with billions of users and tens of billions in revenue, but they’ve had little luck executing the kinds of mergers necessary to reach this scale. Private mergers are often difficult because no cash changes hands, and both buyer and seller need to agree on which company’s currency will be used as stock moving forward. SPACs — which have hundreds of millions of cash on hand — convince some founders who otherwise would have balked at selling. Still, even after a round or two of consolidation, many companies may not have the scale to succeed as publicly traded companies.
“Be careful what you wish for,” said Bernstein. “There is a lot of downside to being a public company. This may be a happy ending for some early VCs, but it’s also true that all of the reasons that worked against these companies going public earlier are still there.”