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BuzzFeed has been hit with an $8.7million compensation claim by current and former employees who allege the company botched its public stock debut, meaning they were unable to sell shares until their value had tanked by 60 per cent.
In two arbitration claims, the employees argued BuzzFeed had failed to provide workers with proper instruction on how to proceed with trading their shares after the initial public offering (IPO) in December.
Shares debuted at $10 each, but their value quickly slumped, and remained at $4.64 per share at the closing bell on Tuesday.
Some staff claim they were unable to offload their shares for several days, resulting in a 60 percent decline in stock value by the time they sold. Others allege they are still unable to sell their shares.
The complaints, which were obtained by the New York Times, allege the ‘Kafkaesque tribulations through which the claimants were dragged have wreaked havoc on their financial lives.’
BuzzFeed, however, has denied the allegations and argues ‘there is no merit to the claims’ outlined in the complaints. The site was hailed as the future of online news in November 2006, thanks to its fun ‘listicles’, and later branched out into serious news.
But it has struggled to find an identity in recent years, with missed revenue targets and multiple rounds of lay-offs – including the closure of most of its international offices – tarnishing the publisher’s prestige.
‘BuzzFeed prioritized communication with former and current employees last year to provide them with the information they needed to manage their equity,’ the company said Tuesday in a statement issued to the newspaper. ‘It’s regrettable that the stock price declined, but there is no merit to the claims and we intend to rebut them vigorously.’
Nearly 80 former BuzzFeed employees are seeking compensation from the company and its executives, including founder Jonah Peretti (pictured Dec. 6, 2021), after they allege he company botched its public stock debut last year, making it so staff were unable to sell their shares at a higher price
In two claims, the employees argued BuzzFeed had failed to provide workers with proper instruction on how to proceed with trading their shares after the initial public offering (IPO) in December. Some staff claim they were unable to offload their shares for several days, resulting in a 60 percent decline in stock value by the time they sold
The two arbitration actions – which name BuzzFeed and its top executives, including founder Jonah Peretti, as the defendants – allege that 77 employees were seeking to cash in their Class B shares when the company went public on December 6, 2021 but were unable to do so because they hadn’t been given proper instruction on how to convert the shares for sale.
The employees, who collectively held 900,000 shares of BuzzFeed stock at the time of the IPO, claim they were not given enough time to complete the necessary paperwork to convert their shares ahead of the public launch.
They claim they were not able to sell their stocks until they reach a value of less than $5, a nearly 60 percent decline.
The impacted workers are seeking compensatory damages of approximately $8.7million, according to the claims.
In addition to BuzzFeed and Peretti, the complaints name Adam Rothstein, the Executive Chairman of 890 5th Avenue Partners, and Continental Stock Transfer, which helped with the IPO, as alleged responsible parties.
As of close Tuesday, BuzzFeed was valued at $4.64 per share, less than half of what it was worth at its debut
The employees allege the ‘Kafkaesque tribulations through which the claimants were dragged have wreaked havoc on their financial lives.’ BuzzFeed, however, has denied the allegations and argues ‘there is no merit to the claims’ outlined in the complaints
The complaint represents reporters, web developers, editors and salespeople who mostly claim they joined the BuzzFeed team during its start-up days and accepted low salaries because they were given stock options.
Many were allegedly looking forward to cashing in on these stock options now that the company was going public.
However, the employees say communication from Continental and BuzzFeed ‘offered contradictory and vague advice about the stock transfers’.
They also allege they were told conversion from Class B stock would take three to five business days, during which BuzzFeed’s stock rapidly declined.
‘As a result, claimants — some of whom still are unable to trade their shares as of the date of this filing — lost the opportunity to sell their hard-earned shares for good value and have been left with stock trading at a mere fraction of its I.P.O. price,’ one of the complaints said.
At least one employee complained directly to Peretti, who co-founded the media company in 2006, about the process, the complaint alleges.
They allege Peretti also complained that he had not been able to cash out his shares at as high of a price as he had hoped.
Additionally, the complaint states that BuzzFeed emailed employees on December 7 to say executives ‘sympathize with your frustration with this process.’
BuzzFeed did not immediately respond to DailyMail.com’s request for comment.
Source: Daily Mail