Vice Media Files for Bankruptcy
Vice Media filed for bankruptcy on Monday, marking a years-long descent from new media darling to cautionary tale about the problems facing the digital publishing industry.
The bankruptcy won’t disrupt the day-to-day operations of Vice’s businesses, which in addition to its flagship site include ad agency Virtue, its Pulse Films division and Refinery29, a women’s-focused site acquired by Vice in 2019.
A group of Vice’s lenders, including Fortress Investment Group and Soros Fund Management, are in the lead position to buy the company out of bankruptcy. The group has submitted a bid of $225 million, which will be covered by its existing loans to the company. It will also assume “significant liabilities”[ads1]; from Vice after any deal closes.
A sales process then follows. The lenders have secured a $20 million loan to keep Vice running, and if a better bid doesn’t emerge, the group that includes Fortress and Soros will buy Vice.
Yet the dreams that VPs once had of a stock market debut or a sale at an eye-watering valuation have been dashed. The company was considered to be worth $5.7 billion at one point.
Investments from media titans like Disney and shrewd financial investors like TPG, which poured in hundreds of millions of dollars, will be rendered worthless by the bankruptcy, cementing Vice’s status among the most notable bad bets in the media business.
Like some of its peers in the digital media industry, including BuzzFeed and Vox Media, Vice and its investors are betting big on the growing power of social media networks like Facebook and Instagram, expecting them to deliver a wave of young, upwardly mobile readers as the advertisers wanted.
Although readers came in their millions, new media companies had trouble turning a profit from them, and the bulk of digital ad dollars went to the big tech platforms. Last month, BuzzFeed spun off its namesake 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 its 2015 value.
“There are definitely commonalities in the difficulties media organizations have faced, and Vice is no exception,” said S. Mitra Kalita, founder and publisher of Epicenter-NYC, a Queens-based community journalism company. “We now know that a brand tied to social media for growth and audience alone is not sustainable.”
Bankruptcy documents filed Monday show that Vice is made up of a network of companies linked to the various businesses, including Pulse Films and Carrot Creative, an advertising agency. The filings say Vice has $834 million in outstanding debt, dwarfing the amount for which Vice was recently in negotiations to sell.
They also show that Vice owes some of its biggest business partners millions of dollars. The company said it owed Wipro, an information technology firm, nearly $10 million. Justin Stefano, one of the co-founders of Refinery29, owes more than $500,000, according to the filings. And Davis Wright Tremaine, a law firm that has represented Vice, has a claim for more than $300,000.
The bankruptcy filing will give the company some relief from its onerous debt load as lenders, including Fortress, try to rescue their investments. Vice Media took out a $250 million loan from Fortress and Soros Fund Management in 2019 as it struggled to make money. It has been in default on that loan for several months.
“It’s the lender coming in and saying, ‘I’m done financing the losses — if I’m going to finance the losses, I’m going to take control of the company,'” said Eric Snyder, chairman of the Bankruptcy Act. company Wilk Auslander. “It’s not unusual for a lender to come in and say to the debtor, the borrower, ‘You’re going to put this in bankruptcy, you’re going to make a proposal to sell, we’re going to put in a first bid.’ “
Fortress sees a continued role at Vice for Shane Smith, the brash co-founder who became synonymous with the company’s gonzo journalism from exotic locations and oversaw a pushy culture rife with sexual harassment allegations, according to a person familiar with the matter. Hozefa Lokhandwala and Bruce Dixon, co-heads of Vice, will also continue.
According to the terms of Vice’s bankruptcy loan, the company has 55 days to complete a sale. In documents filed with the bankruptcy court, Vice said the timeline for the sale, “while tight,” is necessary “to best position the company to survive as a going concern.”
In a statement, Mr. Dixon and Mr. Lokhandwala said the bankruptcy sale will ultimately “strengthen the company.”
“We look forward to completing the sale process in the next two to three months and charting a healthy and successful next chapter at Vice.”
The bankruptcy is a moment of humility for Vice, which a decade ago looked set to sell for an eye-popping sum or make its debut on the public markets. In the 2010s, Vice raised piles of money from traditional media companies, which it had attacked for becoming complacent. The company sold advertisers and investors on its ability to reach young millennials hungry for an alternative to its corporate rivals, delivering you-are-there dispatches from North Korea and Liberia without the decorum of the mainstream news media.
But the harsh realities of digital publishing caught up with Vice, and things went sideways. In 2017, the company raised $400 million from private equity firm TPG in a deal codenamed “Project Venus” that valued the company at $5.7 billion. But the cash infusion left Vice with financial liabilities if it didn’t hit aggressive profitability targets, and it ultimately became an albatross for the company. Later that year, The New York Times and other outlets published investigations into allegations of sexual harassment at the company, starting a crisis at Vice that shook confidence in management.
Mr. Smith replaced himself as CEO of the company, appointing Nancy Dubuc — a longtime A&E television executive who ran hits like “Duck Dynasty” — to oversee the sprawling Brooklyn-based media empire. Investors hoped Dubuc would sell the company or take it public, and she made repeated attempts.
The latest took place this winter, a sales process that attracted interest from several potential suitors. Antenna Group, a Greek media company that has done business with Vice before, expressed interest in buying it, but a deal never materialized. Mrs. Dubuc left in February, with no buyer in sight and without achieving his long-stated goal of consistently monetizing Vice.
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 staff at Vice World News, the company’s global reporting initiative, after it became clear that that effort was no longer financially viable.
Alex Detrick, a spokesman for Antenna and former communications director for Vice under Mr. Smith, declined to comment.
Mrs. Epicenter-NYC’s Kalita, who also co-founded URL Media — a network of black and brown-owned media outlets that share content and advertising — said Vice’s bankruptcy was a reminder to founders to develop many different types of businesses beyond just advertising.
“I think even those of us running profitable media startups now,” Kalita said, “are thinking more carefully about growth and making sure we can continually define our audience and the value we represent to them.”