U.S. media group Vice said on Monday it had filed for bankruptcy to facilitate its sale, an announcement the market had been waiting for a few weeks ago.
The bankruptcy will not disrupt the day-to-day operations of Vice's businesses, which in addition to its main website include advertising agency Virtue, the Pulse Films division and Refinery29, a women-focused site acquired by Vice in 2019.
A group of Vice lenders, including Fortress Investment Group and Soros Fund Management, are on the front lines to bring the company out of bankruptcy. The group has submitted an offer of $225 million, which would be covered by its existing loans to the company. He would also assume "significant responsibilities" from Vice after any deal closes.
A sales process follows. The lenders secured a $20 million loan to continue operating Vice and then, if no better offer emerges, the group that includes Fortress and Soros will acquire Vice.
The lenders secured a $20 million loan to continue operating Vice.
The value
Still, the dreams Vice executives once had of a stock market debut or a sale at a spectacular valuation have been erased. The company was considered worth $5.700 billion.
Investments from media giants like Disney and financial investors like TPG, which spent hundreds of millions of dollars, will lose their value due to bankruptcy, cementing Vice's status among the most notable bad bets in the media industry.
Like some of its peers in the digital media industry, including BuzzFeed and Vox Media, Vice and its investors bet big on the growing power of social networks like Facebook and Instagram, anticipating that they would generate a wave of young, upwardly mobile readers that advertisers craved.
Vice and its investors bet big on the growing power of social media.
Although readers came in by the millions, media startups struggled to turn a profit from them, with most of the digital advertising money going to major tech platforms.
Last month, BuzzFeed shut down its Pulitzer Prize-winning news division after going public at a fraction of its previous valuation, and Vox Media earlier this year raised money at about half of its 2015 valuation.
"There is definitely commonality in the difficulties media organizations face and Vice is no exception," said Mitra Kalita, founder and publisher of Epicenter-NYC, a community journalism company based in the borough of Queens in New York City. "We now know that a brand tied to social media just for its growth and audience is not sustainable."
The bankruptcy filing will give the company some relief from its onerous debt burden as its lenders, including Fortress, seek to salvage its investments. Vice Media secured a $250 million loan from Fortress and Soros Fund Management in 2019 as it struggled to turn a profit. He has been in default on that loan for months.
The bankruptcy is a humbling bath for Vice, which a decade ago seemed destined to sell for a dazzling sum or debut on the public markets. In the 2010s, Vice raised reams of money from traditional media companies, which it had criticized for becoming complacent.
Towards young people
The company convinced advertisers and investors of its ability to reach millennials who craved an alternative to corporate rivals by delivering dispatches from North Korea and Liberia without the decorum of the mainstream media.
But the harsh realities of digital publishing caught up with Vice, and things went awry. In 2017, the company raised $400 million from private equity firm TPG in a deal dubbed "Project Venus" that valued the company at $5.700 billion. But the cash injection saddled Vice with financial obligations if it didn't hit aggressive profitability targets, and eventually became a drag on the company.
Later that year, The New York Times and other outlets published investigations into allegations of sexual harassment at the company, sparking a crisis at Vice that shook confidence in its management.
The situation worsened last month. The company laid off employees after Antenna stopped paying Vice for a production deal worth hundreds of millions of dollars. The cuts included employees of Vice World News, the company's global reporting initiative, after it became clear that those efforts were no longer financially viable.
The New York Times
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