BuzzFeed IPO Illegally Laid Off Employees, Dozens of Claims
BuzzFeed was co-founded by Mr. Peretti in 2006. According to claims, employees, who include journalists, web developers, editors and salespeople, mostly joined BuzzFeed in its early days, when it was of a disjointed start-up. They accepted low wages because they also received stock options, employees said, and Mr. Peretti frequently promoted the company’s eventual IPO plan.
In June of last year, BuzzFeed announced plans to merge with a special purpose acquisition company, or SPAC, called 890 Fifth Avenue Partners to go public. The deal valued BuzzFeed at $1.5 billion. The company is worth about a third now.
At the time of the merger in December, approximately 94% of the more than $250 million raised by SPAC was withdrawn by investors, leaving the company with just $16 million. The complaints argued that because of this, BuzzFeed executives had a fiduciary duty to reassess publishing plans. But the IPO went ahead, and BuzzFeed began trading on the Nasdaq on December 6 under the ticker symbol BZFD.
The employees, it is alleged, were eagerly awaiting the opportunity to finally cash in their shares, but quickly realized they were unable to do so as they were not told further steps were required to convert. their class B shares before they can be sold.
The blunder is not associated with what is commonly known as a “lock-up” agreement that prevents senior executives from selling shares for a set period of time, usually about six months. In this case, employees could sell as soon as they filed the necessary paperwork before the public debut, but they didn’t have enough time to complete the application before the company went public, employees say. .
Communications from Continental and BuzzFeed offered conflicting and vague advice on stock transfers, according to the complaints, and employees were told that stock conversions would take three to five business days. At the same time, BuzzFeed’s share price, which had soared early in the session, was falling rapidly.