The once bright star of Vice Media could now face a darkening future after talks to go public through a special acquisition company fell through.
The Brooklyn-based media company that was founded by the bombastic exec Shane Smith, has ended talks to go public via a merger with blank-check company 7GC & Co., according to a report from tech news site the Information.
Initially, Vice had planned to merge with 7GC in a deal valued at nearly $3 billion including debt, but the company likely didn’t have attractive enough financials to make the deal work, sources familiar with the matter told The Post.
Now, the new plan is to raise money to turn Vice profitable. The company includes female-focused site Refinery29, Vice News and fashion publication i-D. But sources familiar with the matter told The Post that the new strategy is merely a way to stall before figuring out a longer-term plan of what to do next.
“This [investment] is basically a bridge to figuring out something,” said a source. “They are in a pretty awful spot.”
Sources buzzed that Vice has only a few options left as SPAC talks have failed, which could include emergency cash bailouts from investors, cutting costs, selling the company or breaking up the business.
Neither Vice nor 7GC returned requests for comment from The Post.
Under its new plan to aim for profitability, Vice has raised $85 million from existing investors, the Information reported, adding that as part of the new strategy, Smith has “agreed” to give up voting control.
But sources told The Post that Smith, who will remain chairman of the board, was forced to relinquish voting control, as new investors wouldn’t agree to fund the company without gaining control of it.
Vice’s about-face comes as the once-red-hot SPAC market has begun to cool, in part because of new scrutiny from the Securities and Exchange Commission on overinflated revenue projections made by some startups that are merging with SPACs.
Multiple sources with knowledge of Vice’s business said going public was more of a “fantasy” than a reality for the company, which at its height in 2017 had a bloated valuation of $5.7 billion after private equity investor TPG gave the company a $450 million injection of capital. But that infusion came at a cost, as Vice agreed to hefty future repayments, according to reports.
Since then, Vice has stumbled in its effort to grow its business, which has been marked by controversy, questionable deals and cost cuts.
“Nobody in the industry seriously thought that Vice was ready to go public. That was never going to happen,” said a person with knowledge of the matter. “The company has been in a never-ending cycle of layoffs, pivots and emergency cash infusions for half a decade. It appears the downward spiral is still ongoing.”
Just last week, Vice quietly let go of 17 staffers as the company said it would shift its focus from the written word to video storytelling once again.
Founded as Vice Magazine in 1994 by Smith, the company steadily made its push to video and TV. By 2013, Vice had its own weekly news show on HBO. Three years later, it launched a cable channel, Viceland, which slumped in the ratings.
Under Smith, Vice had big dreams of becoming a media juggernaut with revenue touching $1 billion by 2015. But a series of critical reports in 2018 on how Vice was built on bluffs and smoke and mirrors by Smith, who reportedly oversaw a toxic work environment for female staff, tarnished the company and its founder.
Vice’s fortunes were souring and by 2019, the HBO show and the cable channel were canceled, news leaked out that Vice ponied up $1.87 million to settle a pay disparity class-action lawsuit filed by female employees and Smith was replaced as CEO by A&E boss Nancy Dubuc.
Dubuc had been charged with changing the company’s so-called bro culture and she was tasked with integrating the struggling, girl power-focused media giant Refinery29, which the company acquired in 2019 in an all-stock deal. That deal not only lowered the overall valuation of Vice to about $4 billion at the time, but it also baffled media watchers.
“The cultures are oil and water. Misogyny meets feminism,” a digital executive told The Post at the time. “When they merge, there will be very deep cuts on the Refinery side,” predicted the executive. “Vice will gut them.”
The CEO, who has relentlessly focused on culling the company’s international and digital footprint, said last May that Vice’s digital organization at the time accounted for around 50 percent of its headcount costs, but it only brought in about 21 percent of its revenue.
Vice said earlier this month that Dubuc’s strategy made inroads in digital traffic, but in terms of financials, it’s slow-going. Last year, Vice’s revenue fell about 4 percent to $580 million in 2020 and the company was not profitable, according to reports.
Now that going public through a SPAC is off the table, Vice still has those ominous TPG payouts, as the private equity giant wants to get its money out, the Wall Street Journal reported in May.
“Investors have been consistently unable to stabilize the company for years. They have no choice but to throw good money after bad,” said a source, before turning to another less probable solution.
“Shane [Smith] has a massive [$1 billion] net worth and could have bailed out Vice himself,” the source said. “But he clearly had no desire to do so. That shows you how much faith the founder has in the business.”