Buzzfeed, Inc. quarterly report, Q2 FY2021

Business context and reporting period

This is the Form 10-Q of 890 5th Avenue Partners, Inc., a SPAC and the proposed merger partner for BuzzFeed—not an operating-company quarterly report from BuzzFeed. It covers the quarter and six months ended June 30, 2021. The SPAC had not commenced operations and had no operating revenue; activity related to its IPO, target search, and proposed business combination.

Key financial metrics

For the six months, operating cash use was $1.33 million; investing cash use was $287.50 million, primarily the Trust Account deposit; financing cash provided was $289.13 million. Cash increased by $297,000. No operating margins are meaningful because the SPAC had no operating revenue.

Changes versus prior period

Compared with December 31, 2020, cash increased from $202,000 to $498,000, and Trust Account investments rose from zero to $287.51 million following the January 2021 IPO. The company reported no prior-year comparable quarterly results in the provided financial statements. The Q2 loss was driven mainly by a $3.57 million increase in warrant liabilities’ fair value; this is a non-cash, recurring remeasurement that can make reported earnings volatile.

Outlook, transaction terms, and risks

• On June 24, 2021, the SPAC agreed to a two-step merger with BuzzFeed, subject to closing conditions. The filing does not report that the transaction had closed.
• Investors agreed to subscribe for $150 million of unsecured convertible notes due in 2026 in connection with the merger. The stated coupon is 7%, rising to 8.5% if less than $144 million remains in the SPAC trust immediately after closing. The notes are convertible into approximately 12 million shares under specified pricing terms. These are proposed transaction terms, not debt outstanding at June 30.
• Management expected available working capital and borrowing capacity to meet needs through the earlier of a business-combination closing or one year from filing. The sponsor committed up to $2.4 million in working-capital loans; $500,000 was borrowed on August 3, 2021, after quarter-end. Up to $1.5 million of eligible loans may be convertible into post-combination units.
• The SPAC must complete a business combination by January 14, 2023 or generally redeem public shares and liquidate. If the combination closes, public shareholders may redeem shares; the filing states a $5,000,001 minimum net tangible asset condition.
• The filing identifies a material weakness in internal control over financial reporting related to warrant classification and says disclosure controls were ineffective as of June 30. Management said the financial statements fairly present results in all material respects, but remediation was ongoing.
• The filing cites possible negative interest rates on trust investments, uncertainty from COVID-19, and potentially material earnings volatility from warrant fair-value changes. It also discloses a $10.1 million business-combination marketing fee payable to underwriters under specified terms.

Important facts for investors to verify

• Whether the BuzzFeed merger and the associated $150 million convertible-note financing closed, and the final redemption, financing, and conversion terms.
• The actual cash and trust balance available at closing after shareholder redemptions, transaction costs, and any other financing.
• Progress in remediating the warrant-accounting control weakness and whether controls are effective in later filings.
• The dilution and economic impact of redeemable shares, warrants, founder shares, and potential convertible-note shares.
• Whether sponsor loans, the marketing fee, and other transaction-related costs affect liquidity or proceeds to the combined company.