Vice Media Strikes $3 Billion SPAC Valuation Just in Time For SPAC Crackdown

Investors are hoping that what’s vice today may be virtue, tomorrow.

Vice Media — the high-flying, millennial-focused digital media company — is planning to go public via a blank-check merger at a $3 billion valuation. A big number, yes, but skimpy relative to its $5.7 billion valuation in 2017.

SEC Smacks SPACs, Digital Media Feels the Pain

Vice, which bills itself as the “definitive guide to enlightening information,” is in talks with 7GC & Co Holdings. Under the proposed transaction existing Vice shareholders (including Disney, A&E Networks, TPG, and founder Shane Smith) would control roughly 75% of the combined company.

It would make a significant milestone in what has been a troubled story:

• Founder Shane Smith predicted that Vice’s revenue would reach $1 billion by 2015. Last year revenue fell to just $580 million, down from $604 million.
• On the plus side, analysts say the merger would allow the company to escape a painful legacy provision from a deal stuck with TPG in 2017 — the PE firm is entitled to performance-based payments expected to cost Vice between $400 million between 2020 and 2024.

As for the SPAC strategy, Vice isn’t alone. Buzzy digital media mainstays Vox, Bustle, and BuzzFeed have all been plotting blank-check mergers with SPACs, which would allow them to bypass the traditional IPO process. But, as much as trendy editorial voices have positioned them as online content leaders, their business maneuverings have set them behind the curve:

• SPAC deals, all rage earlier this year, have come to a crashing standstill. After an explosive 109 new SPAC deals in March, there were only 10 in April.
• Blame the SEC. The regulator cast doubt on the overly optimistic projections of many startups merging with SPACs and suggested their warrants should be considered liabilities. Now, many SPAC stocks are in freefall.

the takeaway

One of the most highly-anticipated media deals — the Athletic’s planned merger with Axios — has reportedly hit the skids with the Athletic now turning to the New York Times as a merger partner. A busy dance floor.