Gawker Media LLC, an online publishing pioneer, filed for Chapter 11 bankruptcy and put itself up for sale on Friday. The decision came after a $140 million court judgment against it in a lawsuit brought by former professional wrestler Hulk Hogan over a sex tape.
The move followed revelations that Hogan's lawsuit, along with several others against Gawker, were being bankrolled by billionaire investor Peter Thiel, an early backer of Facebook and a co-founder of PayPal.
Thiel's involvement, which stemmed from his ire over Gawker's writings about him and his friends in Silicon Valley, raised alarm bells in U.S. media circles over the prospect of wealthy individuals using the courts to muzzle the press.
Gawker vowed to continue operating its seven websites during the bankruptcy process. Media company Ziff Davis LLC has entered an agreement to buy Gawker's assets for a little less than $100 million, according to people familiar with the matter, but that may be only the initial bid in a court-supervised auction likely to take place at the end of July.
"Even with his billions, Thiel will not silence our writers," Gawker founder and Chief Executive Nick Denton said on Twitter. "Our sites will thrive — under new ownership — and we'll win in court."
Hogan's lawsuit accused Gawker, Denton, and former Gawker editor AJ Daulerio of violating his privacy by publishing a one minute, 41-second edited video clip featuring Hogan having sex with the wife of his then-best friend.
In March, a six-person jury awarded $60 million to Hogan for emotional distress and $55 million for economic damages. The jury then added another $25 million in punitive damages.
Gawker has vowed to appeal the verdict, and legal experts believe the company has a good chance of eventually having the award thrown out or reduced. But at a post-trial hearing in St. Petersburg, Florida on Friday, Gawker said it had just $5.3 million in cash on hand and faced massive legal bills.
The judge agreed to postpone payment of the $140 million judgment while Gawker pursued its appeal, but required the defendants to put up their shares of the company as collateral to be held by Hogan's lawyers.
Gawker objected to having Hogan, whose real name is Terry Bollea, hold the collateral and proposed a different arrangement, which the judge rejected. The company then filed for bankruptcy.
Gawker filed a separate lawsuit in bankruptcy court on Friday asking the judge to extend the bankruptcy court protections to Denton, Daulerio and other former and current Gawker employees.
The lawsuit states that Denton could be forced to file for personal bankruptcy if the lawsuits against him personally are allowed to proceed.
Denton owns about 30 per cent of Gawker, according to the lawsuit. The company posted revenues of $49.9 million in 2015, according to the documents, and has grown at a compound annual rate of 24 per cent over the past three years.
Gawker and Denton were influential forces in the development of online media, developing a direct, conversational style that dispensed with many journalistic conventions and was widely imitated. Its eagerness to dish obscene gossip was often condemned, but it was also one of the few early digital publishers to build a profitable independent business.
Along with its flagship Gawker site, Gawker Media also publishes consumer websites Gizmodo, Lifehacker, Kotaku, Jalopnik, Deadspin, and Jezebel.
Denton said in a prepared statement that he was "encouraged" by the agreement from Ziff Davis, which itself has a long and rocky history. Once a powerful technology trade publisher, the company went through bankruptcy of its own in 2008.
"There's a tremendous fit between the two organizations, from brands to audience to monetization," said a spokesman for Ziff Davis. "We look forward to the possibility of adding these great brands -- and the talented people who support them -- to the Ziff Davis family."
It was not clear on Friday what other bidders might emerge. Univision, which is expanding aggressively in digital media, had previously been cited as a possible suitor.
A spokesman for Peter Thiel declined to comment on Gawker's bankruptcy filing.