Vice Media filed for bankruptcy on Monday, capping a yearlong decline from a new-media darling to a warning sign about the problems facing the digital publishing industry.
The bankruptcy won’t disrupt day-to-day operations for Vice’s businesses, which in addition to its main website include ad agency Virtue, its Pulse Films division and Refinery29, a women’s-focused site that has been acquired by Vice in 2019.
A group of Vice’s lenders, including Fortress Investment Group and Soros Fund Management, are in prime position to pull 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 remove “significant liabilities” from Vice after closing any deal.
The sales process will follow. The lenders secured a $20 million loan to keep Vice running and then, if a better bid didn’t emerge, the group that included Fortress and Soros would take over Vice.
However, the dreams that once held Vice executives of a stock market debut or a sale at an eye-popping valuation have been dashed. The company was considered worth $5.7 billion at one point.
Investments from media titans like Disney and savvy financial investors like TPG, which have spent hundreds of millions of dollars, will be rendered worthless by bankruptcy, cementing Vice’s status among the most notorious bad bets in media industry.
Like some of its peers in the digital-media industry, including BuzzFeed and Vox Media, Vice and its investors have bet big on the rising power of social media networks like Facebook and Instagram, which are expected to deliver they are the young, increasingly mobile readers that advertisers are after.
Although readers came in the millions, new media companies had trouble monetizing them, and most digital ad dollars went to major tech platforms. Last month, BuzzFeed shuttered its namesake Pulitzer Prize-winning news division after going public at a fraction of its prior valuation, and Vox Media earlier this year raised money for roughly half of its 2015 valuation.
“There are certainly similarities in the challenges facing media organizations 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 that is tied to social media for its growth and audience alone is not sustainable.”
Bankruptcy records filed Monday show that Vice is comprised of a web of companies related to its various businesses, including Pulse Films and Carrot Creative, an ad agency. The filings say Vice has $834 million in outstanding debt, which is less than the amount Vice recently discussed selling.
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, is owed more than $500,000, according to the filings. And Davis Wright Tremaine, a law firm representing Vice, has a claim of more than $300,000.
The bankruptcy filing will give the company some relief from its heavy debt 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.
“This is the lender coming in and saying, ‘I’m done funding the losses — if I’m going to fund the losses, I’m going to control the company,'” said Eric Snyder, chairman of bankruptcy at the law firm Wilk Auslander. “It’s unusual for the lender to come in and say to the debtor, the borrower, ‘You’re putting it in bankruptcy, you’re going to make a motion to sell, we’re going to put in the 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 outlandish quarters and oversaw a boundary-pushing culture riddled 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 remain.
According to the terms of Vice’s bankruptcy filing, 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,” was necessary “to best position the company to survive as a going concern.”
In a statement, Mr. Dixon and Mr. Lokhandwala said the bankruptcy sale would ultimately “strengthen the company.”
“We expect to complete the sale process in the next two to three months and chart a healthy and successful next chapter at Vice.”
The bankruptcy is a moment of humility for Vice, which a decade ago appeared destined to be sold for a remarkable sum or make its debut on the public markets. In the 2010s, Vice raised piles of money from traditional media companies, which it criticized for growing complacency. The company sold advertisers and investors on its ability to reach young millennials hungry for an alternative to its corporate rivals, bringing dispatches to you from North Korea and Liberia without the decorum of mainstream news. media.
But the harsh reality 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 named “Project Venus” that values the company at $5.7 billion. But the cash infusion left Vice with financial obligations if it didn’t meet aggressive profitability targets, eventually becoming 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 its management.
Mr. Smith replaced himself as the company’s chief executive, appointing Nancy Dubuc — a longtime TV executive at A&E who shepherded hits like “Duck Dynasty” — to oversee the sprawling media empire based in Brooklyn. Investors expect that Ms. Dubuc the company or take it public, and he tried again and again.
The latest took place this winter, a sale 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. left. Dubuc in February, with no buyers in sight and failing to achieve his long-held goal of continuing to make a profit from 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 employees at Vice World News, the company’s global reporting initiative, after it became clear that those efforts were no longer financially viable.
Alex Detrick, a spokesperson for Antenna and the former chief communications officer for Vice under Mr. Smith, declined to comment.
Mrs. Kalita of Epicenter-NYC, who is also a co-founder URL Media — a network of media outlets owned by Black and brown people that share content and advertising — said Vice’s bankruptcy is a reminder to founders to build many different types of businesses that are more more on advertising.
“I think even those of us who run profitable media start-ups today,” said Ms. Kalita, “is thinking more carefully about growth and making sure we continue to identify our audience and the value we represent to them.”