9:55am PT by Eriq Gardner
Gawker Media Files for Chapter 11 Bankruptcy
Gawker Media has filed for Chapter 11 bankruptcy after a Florida judge issued a $140 million final judgment in favor of Hulk Hogan in the invasion-of-privacy lawsuit over the posting of a sex tape.
The online news organization founded in 2003 by Nick Denton, which now includes other sites like Deadspin, Jezebel and Kotaku, reports that it has less than $100 million in assets and hundreds of millions in liabilities. Gawker is currently facing a rash of litigation that's been connected to Silicon Valley billionaire Peter Thiel. Besides the Hogan suit, there are claims from a journalist and the alleged inventor of email who both say they were defamed. Gawker is also facing off against the parent company of the Daily Mail in court and was hit with a copyright lawsuit this week over a photograph of an Uber car.
Gawker has hired the investment bank Houlihan Lokey to advise it on a possible sale. In conjunction with the bankruptcy filing, Gawker also announced it had entered into an asset purchase agreement to sell its assets to Ziff Davis. The financial terms should be released soon, but it is believed that the tech publisher will be putting up $100 million for the site, which had about 44 million unique visitors last month. The sale could trigger an auction process for other potential buyers and is subject to approval from a bankruptcy court.
"The sale and filing are intended to preserve the value of GMG’s pioneering digital news business, safeguard the jobs of journalists and other staff, and allow GMG to fund the appeal against the $130 million judgment in the Hulk Hogan case against the company in a Florida state court," states a press release.
According to bankruptcy papers, Gawker has secured a $7.66 million loan from Silicon Valley Bank with a line of credit of $5.3 million. Additionally, it's got a second credit agreement worth $15 million with US VC Partners. Gawker will also be seeking $22 million in debtor financing while it aims to restructure itself and fight off collection efforts from Hogan as its dispute with the former professional wrestler goes to an appeals court.
Hogan, of course, is listed as the biggest unsecured creditor in a disputed claim. The wrestler, whose real name is Terry Bollea, filed suit against Gawker after a post in October 2012 about the wonders of watching celebrity sex. In March, a two-week trial was held that resulted in a victory for Hogan as well as Thiel, who provided secret financial backing after being the target of Gawker's former site, Valleywag, which outed him as gay. This week, the Florida judge heard Gawker's motion to forgo putting up a $50 million bond pending the appeal and thanks to the outcome, Gawker felt the need to seek the protections of the bankruptcy court.
Gawker has been controversial from its genesis as a blog that had a feature called "Gawker Stalker" reporting on the movements of celebrities. Gawker has tangled with the likes of Quentin Tarantino for linking to a then-unpublished screenplay of The Hateful Eight and Lena Dunham for revealing her book pitch.
The network of Gawker sites has also broken ground over the years with reports on how Notre Dame football star Manti Te'o was hoaxed, how former Toronto mayor Rob Ford had a crack cocaine addition and how Facebook staffers were allegedly preventing conservatively-tinged stories from trending.
On May 26, Denton published an open letter to Thiel.
"Among the million posts published by Gawker and other properties since the company was founded, there have undoubtedly been occasions we overstepped the line. In offsetting the fawning coverage of tech luminaries and others, sometimes our stories swing too far for my taste toward snark," wrote Denton. "Peter, this is twisted. Even were you to succeed in bankrupting Gawker Media, the writers you dislike, and me, just think what it will mean."
Today's bankruptcy filing will surely do nothing but provide kindling to that fiery discussion.
“Authentic writing, whether it takes the form of honest reviews of technology, video games and entertainment, or revelations about the way the system works, is more important than ever,” commented Denton. “We have been forced by this litigation to give up our longstanding independence, but our writers remain committed to telling the true stories that underpin credibility with our millions of readers. With stronger backing and disentangled from litigation, they can perform their vital work on more platforms and in different forms.”