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Vice Media’s Fall: Shane Smith and How the Company Burned

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7 months ago

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Just weeks after the company he founded entered Chapter 11 bankruptcy last May, Shane Smith jetted to the French Riviera. But this wasn’t a vacation for the 54-year-old flamboyant former Vice CEO to drown his sorrows. Smith landed in Cannes on a mission to save the media company that he had started as a scrappy punk music magazine in Montreal three decades ago from the financial scrap heap.

Smith, the brash face of Vice, had been quietly operating behind the scenes since stepping aside as CEO in 2018. In his new capacity as executive chairman, he worked the phones and hustled for deals as only he knew how. Now, accompanied by his chief of staff, Alon Soran, he was at Cannes Lions, the annual advertising confab that attracts the monied set looking to do business, desperate to ensure the company he had built didn’t disappear into liquidation and irrelevancy.

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In a series of previously unreported meetings with Fortress Investment Group’s managing director, Brian Stewart, Smith convinced Stewart that Vice would have another life, two people familiar with the matter tell The Hollywood Reporter. It was the final play by the master dealmaker on his quest to get the company, now run by CEO Bruce Dixon, to financial stability.

And it worked. On June 23, an announcement went out that a bankruptcy court had approved a $350 million sale of Vice to one of its prior investors, hedge fund Fortress, which led a consortium of buyers in the deal. Smith had pulled off one last magic trick. “In the lore of Shane, this is what he does,” a person familiar with the Cannes meeting says. “Whether it’s on a yacht, or wherever it is, you have this living-large moment and everyone agrees, ‘We are going to do this.’ That’s how he gets the big deals.” Smith did not respond to a request for comment.

For a company valued at $5.7 billion in 2017, it was a fire sale of a transaction. Disney CEO Bob Iger held talks with Shane Smith in 2015 and 2016 about buying the company for $3.4 billion, according to a person with direct knowledge of the discussions. (Disney did not respond to a request for comment.)

But even that valuation turned out to be wildly inflated. Many current and former Vice employees argue that Smith knew the company was puffed up on air because he was the one puffing it up — and was well compensated for doing so. Smith is believed to be paid a multimillion-dollar annual salary and likely far more in commissions and bonuses under the terms of a multiyear deal that began in 2019 and is scheduled to finish at the end of 2024, a well-placed source says.

 

Shane Smith and media executive (and Vice investor) Tom Freston in 2013.

Jemal Countess/Getty Images

Smith knew that a little bit of crazy and a little bit of cool would prove irresistible to legacy media figures. He understood that media has the ability to get people irrational. Who doesn’t like a bit of buzz? Even when that hype is as unhealthy as a sugar high.

By selling “cool” and boasting a much sought-after youth audience, Smith was able to get aging moguls to open their wallets. Murdoch’s 21st Century Fox paid $70 million for a 5 percent stake of Vice in 2013. Two years later, Iger made two bets each of $200 million as Vice unveiled plans to launch TV channel Viceland, which would be distributed in 70 million homes. Murdoch’s youngest son, James, would throw in more money in 2019 and 2021 as the company struggled to stay afloat.

Why did these very serious multibillion-dollar media companies put big bets on Vice? If you’re a top dog at a media organization it’s your job to roll the dice. To put your chips on some squares. Shareholders are looking at you to create optionality. Murdoch and Iger were seeing growth in a business, media, where they didn’t usually see growth and, crucially, they were seeing a notoriously hard demographic to attract and one advertisers flock to: youth.

At the same time, there was an effort made to professionalize the executive structure of Vice. In 2018, Smith brought in former A&E CEO Nancy Dubuc to clean up the books and try to sell the company. But she and her senior leadership team weren’t able to close a deal or produce many programming hits. (Vice’s deal with HBO expired in 2019, while its run at Showtime ended last year.) Dubuc, who departed the company early last year, did not respond to a request seeking comment.

Vice’s bankruptcy filings paint a fascinating narrative of a company cratering under wide-scale industry disruption. It’s a business without a consumer revenue stream that depends too heavily on advertising and partnership deals. Vice “relied on external funding, raising both debt and equity capital to fuel its rapid growth and to fund expenses in certain parts of the business,” wrote Frank A. Pometti, a consultant hired as the chief restructuring officer of Vice Media, in a May 2023 declaration filing. “Although these fund-raising efforts helped to finance Vice’s growth, they ultimately led to the company being burdened by a highly leveraged and unusually complex capital structure.”

With the Feb. 22 disclosure that Vice is getting out of the news business, all that remains is Vice TV, a joint venture of A&E and Vice, the ad agency Virtue and Vice Studios. The question is whether Fortress has a vision other than reducing overall spend as it tries to bring in revenue from a number of stand-alone businesses. “Vice will become a B2B company and no longer pursue a direct-to-consumer strategy,” a person familiar with Fortress’ thinking says, adding: “Vice will be on a path to profitability, for the first time.”

Shane Smith and Nancy Dubuc at Vice’s NewFronts in May 2019 in New York City.

Craig Barritt/Getty Images

At its core, the story of Vice is one of money, greed and the cult of personality. Was Shane Smith a visionary or a villain? Like the characters and stories that the journalists at Vice News pursued over the past 11 years of award-winning journalism, it might be a more complicated portrait than that.

“I remember we would be drunk at a bar and he would have his lips up against my ear holes and he would be like ‘We are going to be so rich. We are gonna get so fucking rich’ and I was like, ‘Dude, it’s Friday lets focus on having fun and not really dwell on how rich we are going to be,’” says Vice co-founder Gavin McInnes, who left the company in 2008 and went on to found the Proud Boys, the far-right group that made headlines for its members’ role in the Jan. 6, 2021 Capitol riot.

“The beauty of Shane is he could have kept Vice going if it was a blog about crocheting mannequins,” McInnes adds of Smith’s fundraising prowess. “He could’ve sold swampland in Florida.”

But Smith did what many could not by taking a defunct lads mag that had been around for more than a dozen years and building it into the first new-media giant since MTV: from web video to sponsored content. With his innovation came big bags of money for other digital media companies, including BuzzFeed, Gawker and Vox, which helped to employ thousands of journalists. Arguably, even CNN and The New York Times took notice of the wave of innovation Smith had created in tone and style.

Whether it be luck or cunning, Smith got out just in time. He is known to enjoy visits to Vegas and, like any professional gambler, smartly cashed out when he was on top. “We have known that, as an industry, digital advertising was going to crash and burn,” a former Vice executive says. “The last 10 to 15 years, these companies were chasing an endless scale that is not sustainable.”

This ex-Vice exec adds, “Shane was able to raise a ton of capital over fifteen years, over and over, and get more money, but it was all smoke and mirrors. He was good at selling a brand and a vibe but it wasn’t real.”

On Feb. 26, Vice formally laid off more than 100 journalists days after CEO Dixon wrote in a memo to staff that “it is no longer cost-effective for us to distribute our digital content the way we have done previously.” The brand’s flagship website is likely to remain dormant, with the possibility that Fortress could shutter it and nuke archives of years of impactful journalism.

“What kept so many of us at Vice for so long was this sense of freedom to work on stories that few others would take on, let alone resource,” says Subrata De, former exec vp news and documentary. “It was an electrifying place with crazy internal pride around the work. That’s what makes the end of Vice News that much more crushing.”

This story appeared in the Feb. 28 issue of The Hollywood Reporter magazine. Click here to subscribe.

 

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Trump could cash out his DJT stock within weeks. Here’s what happens if he sells

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3 weeks ago

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August 23, 2024

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Former President Donald Trump is on the brink of a significant financial decision that could have far-reaching implications for both his personal wealth and the future of his fledgling social media company, Trump Media & Technology Group (TMTG). As the lockup period on his shares in TMTG, which owns Truth Social, nears its end, Trump could soon be free to sell his substantial stake in the company. However, the potential payday, which makes up a large portion of his net worth, comes with considerable risks for Trump and his supporters.

Trump’s stake in TMTG comprises nearly 59% of the company, amounting to 114,750,000 shares. As of now, this holding is valued at approximately $2.6 billion. These shares are currently under a lockup agreement, a common feature of initial public offerings (IPOs), designed to prevent company insiders from immediately selling their shares and potentially destabilizing the stock. The lockup, which began after TMTG’s merger with a special purpose acquisition company (SPAC), is set to expire on September 25, though it could end earlier if certain conditions are met.

Should Trump decide to sell his shares after the lockup expires, the market could respond in unpredictable ways. The sale of a substantial number of shares by a major stakeholder like Trump could flood the market, potentially driving down the stock price. Daniel Bradley, a finance professor at the University of South Florida, suggests that the market might react negatively to such a large sale, particularly if there aren’t enough buyers to absorb the supply. This could lead to a sharp decline in the stock’s value, impacting both Trump’s personal wealth and the company’s market standing.

Moreover, Trump’s involvement in Truth Social has been a key driver of investor interest. The platform, marketed as a free speech alternative to mainstream social media, has attracted a loyal user base largely due to Trump’s presence. If Trump were to sell his stake, it might signal a lack of confidence in the company, potentially shaking investor confidence and further depressing the stock price.

Trump’s decision is also influenced by his ongoing legal battles, which have already cost him over $100 million in legal fees. Selling his shares could provide a significant financial boost, helping him cover these mounting expenses. However, this move could also have political ramifications, especially as he continues his bid for the Republican nomination in the 2024 presidential race.

Trump Media’s success is closely tied to Trump’s political fortunes. The company’s stock has shown volatility in response to developments in the presidential race, with Trump’s chances of winning having a direct impact on the stock’s value. If Trump sells his stake, it could be interpreted as a lack of confidence in his own political future, potentially undermining both his campaign and the company’s prospects.

Truth Social, the flagship product of TMTG, has faced challenges in generating traffic and advertising revenue, especially compared to established social media giants like X (formerly Twitter) and Facebook. Despite this, the company’s valuation has remained high, fueled by investor speculation on Trump’s political future. If Trump remains in the race and manages to secure the presidency, the value of his shares could increase. Conversely, any missteps on the campaign trail could have the opposite effect, further destabilizing the stock.

As the lockup period comes to an end, Trump faces a critical decision that could shape the future of both his personal finances and Truth Social. Whether he chooses to hold onto his shares or cash out, the outcome will likely have significant consequences for the company, its investors, and Trump’s political aspirations.

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Arizona man accused of social media threats to Trump is arrested

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3 weeks ago

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August 23, 2024

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Cochise County, AZ — Law enforcement officials in Arizona have apprehended Ronald Lee Syvrud, a 66-year-old resident of Cochise County, after a manhunt was launched following alleged death threats he made against former President Donald Trump. The threats reportedly surfaced in social media posts over the past two weeks, as Trump visited the US-Mexico border in Cochise County on Thursday.

Syvrud, who hails from Benson, Arizona, located about 50 miles southeast of Tucson, was captured by the Cochise County Sheriff’s Office on Thursday afternoon. The Sheriff’s Office confirmed his arrest, stating, “This subject has been taken into custody without incident.”

In addition to the alleged threats against Trump, Syvrud is wanted for multiple offences, including failure to register as a sex offender. He also faces several warrants in both Wisconsin and Arizona, including charges for driving under the influence and a felony hit-and-run.

The timing of the arrest coincided with Trump’s visit to Cochise County, where he toured the US-Mexico border. During his visit, Trump addressed the ongoing border issues and criticized his political rival, Democratic presidential nominee Kamala Harris, for what he described as lax immigration policies. When asked by reporters about the ongoing manhunt for Syvrud, Trump responded, “No, I have not heard that, but I am not that surprised and the reason is because I want to do things that are very bad for the bad guys.”

This incident marks the latest in a series of threats against political figures during the current election cycle. Just earlier this month, a 66-year-old Virginia man was arrested on suspicion of making death threats against Vice President Kamala Harris and other public officials.

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Trump Media & Technology Group Faces Declining Stock Amid Financial Struggles and Increased Competition

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3 weeks ago

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August 20, 2024

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Trump Media & Technology Group’s stock has taken a significant hit, dropping more than 11% this week following a disappointing earnings report and the return of former U.S. President Donald Trump to the rival social media platform X, formerly known as Twitter. This decline is part of a broader downward trend for the parent company of Truth Social, with the stock plummeting nearly 43% since mid-July. Despite the sharp decline, some investors remain unfazed, expressing continued optimism for the company’s financial future or standing by their investment as a show of political support for Trump.

One such investor, Todd Schlanger, an interior designer from West Palm Beach, explained his commitment to the stock, stating, “I’m a Republican, so I supported him. When I found out about the stock, I got involved because I support the company and believe in free speech.” Schlanger, who owns around 1,000 shares, is a regular user of Truth Social and is excited about the company’s future, particularly its plans to expand its streaming services. He believes Truth Social has the potential to be as strong as Facebook or X, despite the stock’s recent struggles.

However, Truth Social’s stock performance is deeply tied to Trump’s political influence and the company’s ability to generate sustainable revenue, which has proven challenging. An earnings report released last Friday showed the company lost over $16 million in the three-month period ending in June. Revenue dropped by 30%, down to approximately $836,000 compared to $1.2 million during the same period last year.

In response to the earnings report, Truth Social CEO Devin Nunes emphasized the company’s strong cash position, highlighting $344 million in cash reserves and no debt. He also reiterated the company’s commitment to free speech, stating, “From the beginning, it was our intention to make Truth Social an impenetrable beachhead of free speech, and by taking extraordinary steps to minimize our reliance on Big Tech, that is exactly what we are doing.”

Despite these assurances, investors reacted negatively to the quarterly report, leading to a steep drop in stock price. The situation was further complicated by Trump’s return to X, where he posted for the first time in a year. Trump’s exclusivity agreement with Trump Media & Technology Group mandates that he posts personal content first on Truth Social. However, he is allowed to make politically related posts on other social media platforms, which he did earlier this week, potentially drawing users away from Truth Social.

For investors like Teri Lynn Roberson, who purchased shares near the company’s peak after it went public in March, the decline in stock value has been disheartening. However, Roberson remains unbothered by the poor performance, saying her investment was more about supporting Trump than making money. “I’m way at a loss, but I am OK with that. I am just watching it for fun,” Roberson said, adding that she sees Trump’s return to X as a positive move that could expand his reach beyond Truth Social’s “echo chamber.”

The stock’s performance holds significant financial implications for Trump himself, as he owns a 65% stake in Trump Media & Technology Group. According to Fortune, this stake represents a substantial portion of his net worth, which could be vulnerable if the company continues to struggle financially.

Analysts have described Truth Social as a “meme stock,” similar to companies like GameStop and AMC that saw their stock prices driven by ideological investments rather than business fundamentals. Tyler Richey, an analyst at Sevens Report Research, noted that the stock has ebbed and flowed based on sentiment toward Trump. He pointed out that the recent decline coincided with the rise of U.S. Vice President Kamala Harris as the Democratic presidential nominee, which may have dampened perceptions of Trump’s 2024 election prospects.

Jay Ritter, a finance professor at the University of Florida, offered a grim long-term outlook for Truth Social, suggesting that the stock would likely remain volatile, but with an overall downward trend. “What’s lacking for the true believer in the company story is, ‘OK, where is the business strategy that will be generating revenue?'” Ritter said, highlighting the company’s struggle to produce a sustainable business model.

Still, for some investors, like Michael Rogers, a masonry company owner in North Carolina, their support for Trump Media & Technology Group is unwavering. Rogers, who owns over 10,000 shares, said he invested in the company both as a show of support for Trump and because of his belief in the company’s financial future. Despite concerns about the company’s revenue challenges, Rogers expressed confidence in the business, stating, “I’m in it for the long haul.”

Not all investors are as confident. Mitchell Standley, who made a significant return on his investment earlier this year by capitalizing on the hype surrounding Trump Media’s planned merger with Digital World Acquisition Corporation, has since moved on. “It was basically just a pump and dump,” Standley told ABC News. “I knew that once they merged, all of his supporters were going to dump a bunch of money into it and buy it up.” Now, Standley is staying away from the company, citing the lack of business fundamentals as the reason for his exit.

Truth Social’s future remains uncertain as it continues to struggle with financial losses and faces stiff competition from established social media platforms. While its user base and investor sentiment are bolstered by Trump’s political following, the company’s long-term viability will depend on its ability to create a sustainable revenue stream and maintain relevance in a crowded digital landscape.

As the company seeks to stabilize, the question remains whether its appeal to Trump’s supporters can translate into financial success or whether it will remain a volatile stock driven more by ideology than business fundamentals.

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