Gawker Media files for bankruptcy Company files for Chapter 11 to protect assets from seizure by Hulk Hogan

Gawker Media filed for Chapter 11 bankruptcy protection on Friday, in order to protect its assets from seizure by former professional wrestler Hulk Hogan.

Simultaneously, Gawker Media parent company Gawker Media Group announced that it had agreed to sell its assets in an auction supervised by a bankruptcy court. Ziff Davis, the media company that owns PC Mag, has agreed to purchase Gawker’s assets for $90 million to $100 million, a person close to Gawker told POLITICO, though it’s expected that other potential buyers will participate in the auction and make higher bids.

Story Continued Below

Vox Media, Penske Media and Univision have all been named as potential Gawker buyers, though it is not known whether they will participate in the auction. As POLITICO reported last month, Univision held preliminary discussions with Gawker before the Hogan trial that valued the company in the $200 million range.

Though it's filing for bankruptcy, Gawker has no plans to cease its operations. The company will continue to operate as normal while the bankruptcy process proceeds and it appeals the Hogan judgment.

The proceeds from the sale of the assets will be put in escrow while Gawker appeals the Hogan case. If the $140.1 million judgment is upheld on appeal, then some of the money held in escrow will go to Hogan. If the judgment is overturned on appeal, then most of the money held in escrow will be returned to Denton and the company's other shareholders.

In March, a jury awarded Hogan a $140.1 million judgment against Gawker Media, CEO Nick Denton and former Gawker.com editor A.J. Daulerio. Following the trial, Gawker asked the presiding judge, Pamela Campbell, to either reduce or overturn the jury verdict. She upheld the full amount of the judgment.

While the lawsuit was filed by lawyers working for Hogan, it has since been revealed that Silicon Valley billionaire Peter Thiel was secretly financing the effort, and may be involved in other suits against Gawker.

Thiel, through a spokesperson, declined to comment on today's news.

On Friday morning, Gawker asked Campbell to issue a routine stay in order to prevent Hogan from collecting on the judgment while the company appealed.

In its motion for a stay, Gawker revealed that it could not afford the $140.1 million judgment or the standard $50 million bond that is standard for a stay pending appeal in Florida. Instead, it asked the judge to grant a stay without requiring Gawker to post a cash bond.

“[Financial consultants] concluded that even without a stay of execution of this judgment, Gawker Media faces significant challenges in its ability to continue to operate with positive cash flow, in large part due to the enormous legal fees that Gawker Media has incurred, and will continue to incur, in this case and others filed by [Hogan’s attorney Charles] Harder,” Gawker president Heather Dietrick wrote in an affidavit filed with the court. “As a result, Gawker cannot post a bond in any substantial amount.”

At the end of May, Gawker Media’s balance sheet showed total assets of about $33.8 million — including $5.3 million in cash, $11.9 million in accounts receivable and $12.5 million in fixed assets. Its total current liabilities were $27.7 million. Its total long term liabilities were $22.8 million — including a $15 million loan from tech VC firm Columbus Nova and a $6.4 million loan from Silicon Valley Bank.

A bond broker, David H. Carr, wrote in an affidavit that Gawker’s “book value” — assets minus liabilities — was just $10 million, which meant that it could not post a $50 million bond.

In his own affidavit, Denton said that he personally owned about 45 million of Gawker Media Group’s 152 million shares, giving him a 29.52 percent stake in the company. (His family also has a stake in the company through a trust.)

He also disclosed his other assets: a Manhattan condo valued at $4.2 million which he took out a $2 million mortgage on and is now trying to rent and $150,000 or so in personal bank accounts and retirement accounts.

A confidential report on Denton's net worth prepared in December stated that he owned 5,000 shares of Vox Media. Denton was an early investor in Curbed, which was founded by former Gawker editor Lockhart Steele. When Vox acquired Curbed in 2013, Denton’s stake in Curbed became a stake in Vox. At the time of the acquisition, Denton’s stake in Vox was valued at $150,000, though it’s likely worth much more now.

In his affidavit, Denton offered to pledge his entire stake in the company as security for the appeal if the stay was granted.

“As security for the appeal in the above-captioned matter, I am willing to pledge the entirety of my interest in [Gawker Media Group]. I respectfully request that the court deem that full ownership interest to be adequate security to stay the judgment pending appeal,” he wrote.

Campbell did grant Gawker a stay, but only under conditions that Gawker described as “onerous.” A person close to Gawker said that the conditions of the stay would have given Hogan a lien on all of Gawker's assets, allowing him to begin seizing the assets, and would have prohibited Gawker from using cash to fund its operations.

In response, Gawker decided to file for Chapter 11 bankruptcy protection to prevent Hogan from seizing its assets.

According to staff at the company, employees were taken by surprise at Friday’s news about the bankruptcy filing and about Ziff Davis’s interest in acquiring the company.

“Everyone knew this was one potential outcome but I don’t know that anyone was expecting the announcement today,” one staffer told POLITICO.

“We feel how you would expect us to feel,” another staffer said.

A number of Gawker Media properties — Gawker.com, Deadspin, Jezebel, Gizmodo — published notes to their readers explaining that the sites would continue operating as usual while the company went through bankruptcy.

“In the long run, we’re all dead; until then, we’ll be doing the sort of thing we usually do, and you can do so too,” Deadspin editor Tim Marchman wrote.

Responses to the news from former Gawker employees were mixed.

“Congratulations to the unexceptional men who took a vibrant company that a lot of people worked hard to build and flew it into the ground,” tweeted Anna Holmes, the founding editor of Jezebel who has since left Gawker.

“I loved working at Gawker. I love the people I met working at Gawker. This is awful," tweeted Leslie Horn, a former editor at Deadspin and Gizmodo.

"[That feeling when] you realize buying Gawker stock instead of paying your student loans was a tragic mistake," tweeted James Del, Gawker's former advertising director.

Additional reporting by Kelsey Sutton