After abandoned plans to go public and a renewed attempt to sell itself in the private market, Vice Media (VICEM) accepted a $30 million loan from Fortress Investment Group, the Wall Street Journal reported Feb. 14. The company reportedly owes millions to vendors, some of which haven’t been paid in six months and have resorted to debt collectors.
Vice’s fortunes have declined in recent years. In 2017, it was valued at $5.7 billion, a figure based on venture capital funding. It pursued going public through a $3 billion merger with a special-purpose acquisition company but tabled talks after raising additional funding. It is now seeking $1 billion to $1.5 billion in a sale but could earn less, according to CNBC. Vice reportedly missed its 2022 revenue goal of $700 million by $100 million, according to the Journal.
“Fortress providing what seems like a bailout loan is a red flag, especially when you hear Fortress is one of the groups trying to push for (Vice’s) sale,” said Kyle Stanford, a venture capital analyst at Pitchbook, which publishes private market data. As a lender, Fortress will be one of the first groups paid when Vice sells. It’s a warning sign because Fortress “has inside information on the company’s balance sheet, and if they’re pushing to sell, they’re not looking for the loan to last the company a long time.”
Vice did not respond to an interview request.
Vice isn’t profitable, but it cut its losses by 50 percent last year, CEO Nancy Dubuc said in an interview with the New York Times. In November, Vice cut a dozen members from its staff, and Dubuc said in an email to employees she hopes to cut costs by 15 percent. But the company “can’t rely on operating expense cuts to get profitable,” Stanford said.
Fortress might not see Vice as a high growth company or expect Vice to compete well in the crowded market for advertising, which is why it wants the sale to move forward and get paid back for its loans, Stanford said. Fortress didn’t immediately respond to a request for comment.
What happens if Vice can’t sell
In this depressed climate for advertising, there are fewer media companies interested in acquisitions, Stanford said. If Vice can’t complete a sale, it has a few options. It could sell itself in pieces, which the company explored last year but ultimately abandoned, favoring selling itself as a whole. Some of Vice’s assets, including its studio and Virtue, its advertising agency, have reportedly interested buyers, according to the Times. It could try to raise more capital, but it will be difficult to convince investors of its prospects if it can’t complete a sale, he said.
It could continue to be a slow-growth media company, Stanford said, which might mean restructuring its business. Even though Vice laid off some employees last year, it could implement cuts in bigger numbers to protect its bottom line, said Max Navas, another Pitchbook venture capital analyst. Creditors could also pressure it to significantly lower its price, he said.
