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Choose Your Vice Carefully

Vice Media Group, apparently close to a deal with a blank check fund that will allow it to go public, is once again becoming the example that investment schoolmarms point to when warning about throwing good money at the latest fad. But for all the tsk-tsking, it really shouldn’t come as a surprise that Vice, once the epitome of the brash, take-no-prisoners, let’s-break-stuff management style, is now valued at less than half what it was at its height four years ago. It’s partners did that ages ago.

According to The Information, Vice Media is talking with at least two unnamed special purpose acquisition corporations (SPACs), one of which made an offer that values the media operation at about $2.5 billion, or less than half the $5.7 billion it was valued at in 2017. 

According to some reports, Vice Media’s global revenue was about $600 million in 2020 -- about the same as in 2019 -- making the $2.5 billion valuation about four times revenue. 

Vice Media logo

(Image credit: Vice Media)

While Vice seeks out some kind of lifeline, another digital company that appears to be the target of SPACs -- Buzzfeed -- appears to be having better luck. 

Buzzfeed, according to The Information, is being courted by a SPAC -- 890 Fifth Avenue Partners -- that values it at slightly below its peak $1.7 billion valuation. 

Vice grabbed a lot of headlines in 2017 when private equity fund TPG Capital invested about $450 million in the media company, giving it that eye-popping $5.7 billion valuation. That was nearly twice the market cap of AMC Networks -- home of the most watched program on cable at the time The Walking Dead -- for a media company that was ready, by its own admission, to take the cable business by storm.

That storm never happened. Viceland, the network that took the place of H2, the network even History Channel forgot, rebranded as Vice TV last year and has continued to have middling ratings. Its most-watched show is Dark Side of the Ring, a wrestling docu-series that averages under 400,000 live-plus-three viewers in the coveted 18-49 year old age bracket. The rest of its programming lineup is a mix of “edgy” programming like F*ck That’s Delicious, Gaycation and Balls Deep, as well as reruns of It's Always Sunny in Philadelphia. 

Also Read: Of Vice and Men

But signs that the wheels were falling off the Vice Media gravy train were apparent as early as in 2018, when Disney, which invested $400 million in Vice Media in 2014, took a $157 million impairment to that stake in 2018 and another $353 million impairment in 2019. 

According to its last 10-K annual report, filed in November. Disney effectively owns a 24% interest in Vice (14% fully diluted), that it deems essentially worthless. 

Now, Disney’s write-down doesn’t man that Vice Media is worth nothing, just that Disney doesn’t believe it will ever get its money back. But the write-off still was a smudge on Vice’s once bright veneer.  

Seasoned programming executive Nancy Dubuc took the helm of Vice in 2018 and has been looking for a way to make its anxious investors whole for years. Talk of an IPO first surfaced in 2019, and Dubuc reportedly renegotiated the terms of the TPG investment -- replacing stock and cash dividend payments to the PE firm with preferred equity awards.  That gave Vice some breathing room, as it moves toward profitability. This year, with the surge in SPAC offerings looking to put their money somewhere, anywhere, in the media space, Vice has attracted some attention. 

SPACs have the money -- according to SPAC Insider, 270 SPACs have been created this year raising $88 billion -- to invest in the media space, but not necessarily the stomach. 

Also Read: SPACs: The (New) Final Frontier 

While there have been some SPAC programming investments -- notably Software Acquisition Corp.’s purchase of CuriosityStream last year -- they have generally steered clear of television. The main reason, some SPAC executives say, is that consolidation in the industry has already taken place.  

But Vice Media isn’t just TV. Its biggest business is in digital media, with websites like Munchies, Motherboard, Noisey, i-D and Garage. Vice Studios has produced films like The Report, starring Adam Driver and Annette Bening; Harmony Korine’s The Beach Bum; and Netflix docu-series 1994.  But there too lies a problem. Vice Media’s websites don’t appear to be growing that much.

According to web analytics company SimilarWeb, vice.com ranks 101st among news sites and averaged about 30.29 million total visits in February. In contrast, SimilarWeb ranked Buzzfeed.com 29th among news sites with 125.24 million total visits in February.

On its own website, Vice says its digital properties attract about 50.4 million unique visitors per month in the U.S. and 135 million globally.  

Also Read: Losing Cool? 

Former and current media executives have hopped on the SPAC bandwagon recently. Dish chairman Charlie Ergen launched a $1  billion SPAC (CONX Corp.) in October that has since lowered that amount to about $750 million;  John Malone’s Liberty Media closed the $575 million Liberty Acquisition Corp. SPAC in January;  former AT&T Broadband and YES Network chief Leo J. Hindery Jr. launched two SPACs -- Trine Acquisition and Trine Acquisition II ; former WWE executives George Barrios and Michelle Wilson  are trying to raise $200 million through their own SPAC vehicle (Isos Acquisition); and former Disney executives Kevin Mayer and Tom Staggs raised $250 million through their Forest Road Acquisition SPAC -- so there is no scarcity of media expertise in the space. And let’s not forget that the most successful line of SPACs to date -- Eagle Investment Partners, which last year purchased online sports betting giant DraftKings -- is led by two former media executives, former MGM Chairman Harry Sloan and former CBS Entertainment chief Jeff Sagansky. 

That scarcity of available media assets would appear to be in Vice Media’s favor, but at least one exec has said there are other factors that would serve as roadblocks to a deal.

“On the one hand, it seems like a bad neighborhood,” said one SPAC executive who asked not to be named. “I think of the other names that seem similar to Vice over the past few years -- Mashable, Gawker, the Univision properties -- there were several that effectively billed themselves as strong digital media companies that had their finger on the zeitgeist of millennials and would capitalize on all the Facebook and Google advertising to grow their top line.”

That obviously didn’t happen as planned. And the decline in digital properties isn’t specific to Vice. Everyone in the space has seen their lofty valuations plummet.Vice has been singled out in part because if its brash owner -- Smith once said that a year from the launch of Viceland he would be on the cover of Time as the guy that brought millennials back to TV  -- and accusations of sexual harassment and a frat boy culture that caused some shakeups in the ranks. 

Vice has made some big strides in dismantling the boys club culture -- its latest diversity and inclusion report notes that 56% of its employees identify as women, as well as 58% of new hires. 

But that combination of bad press and a declining market with no obvious growth resolution has made a private capital injection unlikely and an IPO out of the question for Vice. That leaves the SPAC door open. 

A SPAC would be an efficient way for Vice to get enough capital to clean up its balance sheet, get some money to fund growth and give early investors at least some of their money back. 

“You have to cash all of these guys out,” said the SPAC executive. “From the standpoint of the people whose money is trapped, the SPAC is an amazing solution.”

But the nagging question remains: If Vice couldn’t reach revenue milestones in the past, what’s to say it won’t miss them again?

“There is a fair price for Vice, and if they hit the right price it can trade and make a lot of shareholders happy,” the executive said. “I just don't understand how they are going to solve the core issue of how the industry is in bad shape and the company just doesn’t have the goods to deliver.” 

The SPAC executive said that Vice has been shopped to just about every blank check company looking at the media space, and added that while he was not privy to which ones are taking a closer look, TPG could ultimately be a player as well. TPG has its own SPACs -- earlier this month it launched TPG Pace Tech Opportunities II Corp, TPG Pace Beneficial II Corp and TPG Pace Solutions Corp with the intention of raising more than $1 billion to invest in technology, media and telecom firms. TPG has a lot of experience with the SPAC format, having raised billions of dollars through several SPAC vehicles over the years. Most recently, its TPG Pace Tech Opportunities SPAC agreed to purchase tech company Nerdy in a deal that valued that firm at $1.7 billion.

TPG could take the same route with Vice Media, agreeing to buy the company at a lower valuation in return for a larger equity stake. That would allow Vice to pay down some of its debt, get capital to run the business and give TPG a larger piece of a smaller pie. 

“Over time the share price will go up and they can monetize that investment at various share prices and get back their money,” the SPAC executive said. “But it all requires that the growth is really there. That would be a clever way for TPG to use the structure to potentially get out of this.”  

And like some other vices, getting out from under is the ultimate goal.