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Vice Media filed for bankruptcy on Monday, punctuating a yearslong descent from a new-media darling to a cautionary tale of the problems facing the digital publishing industry.
The bankruptcy will not interrupt daily operations for Vice’s businesses, which in addition to its flagship website include the ad agency Virtue, the Pulse Films division and Refinery29, a women-focused site acquired by Vice in 2019.
A group of Vice’s lenders, including Fortress Investment Group and Soros Fund Management, is in the leading position to acquire the company out of bankruptcy. The group has submitted a bid of $225 million, which would be covered by its existing loans to the company. It would also take over “significant liabilities” from Vice after any deal closes.
A sale process follows next. The lenders have secured a $20 million loan to continue operating Vice and then, if a better bid does not emerge, the group that includes Fortress and Soros will acquire Vice.
Still, the dreams that Vice executives once had of a stock market debut or a sale at an eye-popping valuation have been wiped away. 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 spent 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 industry.
Like some of its peers in the digital-media industry, including BuzzFeed and Vox Media, Vice and its investors bet big on the rising power of social media networks like Facebook and Instagram, anticipating they would deliver a tide of young, upwardly mobile readers that advertisers craved.
Though readers came by the millions, new media companies had trouble wringing profits from them, and the bulk of digital ad dollars went to the major tech platforms. Last month, BuzzFeed shut down its namesake Pulitzer Prize-winning news division after going public at a small fraction of its earlier valuation, and Vox Media earlier this year raised money at roughly half its 2015 valuation.
“There are definitely commonalities in the hardships media organizations have been facing and Vice is no exception,” said S. Mitra Kalita, the founder and publisher of Epicenter-NYC, a community journalism company based in Queens. “We now know that a brand tethered to social media for its growth and audience alone is not sustainable.”
Bankruptcy records filed Monday show that Vice is made up of a web of companies associated with its various businesses, including Pulse Films and Carrot Creative, an ad agency. The filings say Vice has outstanding debt of $834 million, dwarfing the amount Vice was recently in talks to sell for.
They also show 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, is owed more than $500,000, according to the filings. And Davis Wright Tremaine, a law firm that has represented Vice, has a claim of more than $300,000.
The bankruptcy filing will give the company some relief from its onerous debt load as its lenders, including Fortress, seek to salvage their investments. Vice Media raised a $250 million loan from Fortress and Soros Fund Management in 2019 as it struggled to make a profit. It has been in default on that loan for months. “It’s the lender coming in and saying, ‘I’m done funding the losses — if I’m going to fund the losses, I’m going to take control of the company,” said Eric Snyder, chairman of bankruptcy at the law firm Wilk Auslander. “It’s not unusual for the lender to come in and tell the debtor, the borrower, ‘You’re putting this into bankruptcy, you’re going to make a motion to sell, we’re going to put in a first bid.’”
Fortress sees a continuing role at Vice for Shane Smith, the brash co-founder who became synonymous with the company’s gonzo journalism from exotic locales and oversaw a boundary-pushing culture that was rife with allegations of sexual harassment, according to a person familiar with the matter. Hozefa Lokhandwala and Bruce Dixon, co-chief executives at Vice, will also stay on.
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 that the timeline to 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 that the bankruptcy sale would 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 appeared destined to sell for an eye-watering sum or make its debut on the public markets. In the 2010s, Vice raised piles of money from traditional media companies, which it had assailed for growing complacent. The company sold advertisers and investors on its ability to reach young millennials who were 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.
Shane Smith, left, with the former Vice chief executive, Nancy Dubuc. Mr. Smith, the brash co-founder of Vice who became synonymous with the company’s gonzo journalism, will continue on as an adviser.
But the harsh realities of digital publishing caught up with Vice, and things went sideways. In 2017, the company raised $400 million from the private equity firm TPG in a deal code-named “Project Venus” that valued the company at $5.7 billion. But the cash infusion saddled Vice with financial obligations if it didn’t hit aggressive profitability targets, and it eventually 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, kicking off a crisis at Vice that shook confidence in its management.
Mr. Smith replaced himself as chief executive of the company, appointing Nancy Dubuc — a longtime TV executive at A&E who shepherded hits like “Duck Dynasty” — to oversee the sprawling Brooklyn-based media empire. Investors hoped Ms. Dubuc would sell the company or take it public, and she made repeated attempts.
The latest took place this winter, a sales process that drew interest from several potential suitors. Antenna Group, a Greek media company that has done business with Vice before, expressed interest in acquiring it, but a deal never materialized. Ms. Dubuc left in February, with no buyer in sight and without achieving her long-stated goal of consistently turning a profit at Vice.
The situation got worse last month. The company laid off employees after Antenna stopped making payments to Vice for a production deal worth hundreds of millions of dollars. The cuts included employees at Vice World News, the company’s global reporting initiative, after it became clear those efforts were no longer financially viable.
Alex Detrick, a spokesman for Antenna and the former chief communications officer for Vice under Mr. Smith, declined to comment.
Ms. Kalita of Epicenter-NYC, who also co-founded URL Media — a network of media outlets owned by Black and brown people that share content and advertising — said Vice’s bankruptcy was a reminder to founders to develop many different kinds of businesses beyond just advertising.
“I think even those of us running profitable media start-ups now,” Ms. Kalita said, “are thinking more carefully about growth and making sure we can continuously define our audience and the value we represent to them.”
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