Gawker files for Chapter 11 Bankruptcy

USA Today reports that Gawker Media has been ordered by the courts to pay legendary wrestler Hulk Hogan an estimated $140 million dollars. The settlement which was ordered after an invasion of privacy lawsuit was filed by the wrestler has forced the media outlet to file for Chapter 11 bankruptcy protection and place their assets for sale.

According to the verdict issued by a Florida jury, Hulk Hogan’s privacy was violated when Gawker posted a one minute and forty-one second clip of the tape online with commentary. Gawker founder Nick Denton and editor A.J. Daulerio posted the clip and both of them were found personally responsible.

What will happen to Gawker?

Auctioning for Gawker’s assets is expected to begin in late July with reports that Ziff Davis has offered an estimated $100 million as the opening price. The bankruptcy court will supervise the auction and approve the terms of the sale. If David, who is the digital publisher of AskMen, PCMag and Computer Shopper, is successful he will assume the assets of the company but not the debts.

A review of the US Bankruptcy Court filings reveals that Gawker’s assets which include Gizmodo, Lifehacker and Deadspin  total $50 million to $100 million and liabilities of $100 million to $500 million.

Although Gawker did not provide any type of comment about the potential sale, CEO for Ziff David stated that “there’s a tremendous fit between the two organizations.” Others close to the companies agree the acquisition of Gawker by Ziff Davis would be great for the company because of Davis’s knowledge about e-commerce, licensing and video expertise.

What is a Chapter 11 Bankruptcy filing?

Gawker is not the first company to file Chapter 11. In fact, many companies such as General Motors, Kodak, Enron, Marvel Entertainment, Hugo Boss, Lehman Brothers, and Readers Digest Association have file bankruptcy in the past. While many companies have been able to file for Chapter 11 and successfully restructure their debts and remain in business, others have not.

If a company chooses to remain in business and not liquidate their assets it’s generally because they believe that the amount of long-term revenues they can generate by remaining in business is higher than the money they could receive if they liquidated their assets.

Under Chapter 11 bankruptcy the business is allowed to reorganize their business and create a repayment plan, although the business becomes what is termed a “debtor in possession” keeping ownership of the business and maintaining control of their day to day business operations.

Other options may also be available under the reorganizational plan. For example, some companies may offer stock to credits, lay off workers, or renegotiate contracts. Other options for reducing debts can include renegotiating contracts with suppliers and unions and redoing lease agreements. Businesses are not, however, allowed to purchase new companies while in Chapter 11 but are instead limited to simply continuing their standard business operations.

Bottom line for Gawker- bad business can cost you your business.

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Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.