BuzzFeed was co-founded by Mr. Peretti in 2006. According to the claims, the employees, which includes reporters, web developers, editors and salespeople, had mostly joined BuzzFeed in its early days when it was a scrappy start-up. They accepted low salaries because they were also given stock options, the employees said, and Mr. Peretti frequently promoted the eventual plan to take the company public.
In June last year, BuzzFeed announced its plans to merge with a special purpose acquisition company, or SPAC, called 890 Fifth Avenue Partners in order to go public. The deal valued BuzzFeed at $1.5 billion. The company is worth about one-third of that now.
By the time of the merger in December, about 94 percent of the over $250 million raised by the SPAC was withdrawn by investors, leaving the company with only $16 million. The complaints argued that because of this, BuzzFeed executives had a fiduciary duty to re-evaluate the plans to go public. But the I.P.O. went ahead, and BuzzFeed began trading on Nasdaq on Dec. 6 under the ticker symbol BZFD.
The employees, the claims said, were looking forward to finally cashing in their shares but quickly realized that they were unable to do so because they had not been told extra steps were needed to convert their Class B shares before they could sell them.
The blunder is not associated with what is commonly known as a “lockup” agreement that prevents top executives from selling shares for a specified period, typically about six months. In this case, employees could sell as soon as they filed necessary paperwork ahead of the public debut, but they were not given enough time to complete the application until after the company hit the stock market, the employees say.
Communications from Continental and BuzzFeed offered contradictory and vague advice about the stock transfers, according to the complaints, and employees were told the conversion of shares would take three to five business days. At the same time, BuzzFeed’s stock price, which had spiked in early trading, was rapidly dropping.