A high evaluation of Vice Media by a private equity firm is resulting in unsustainable equity payments.

In 2017, Vice Media felt pressured to raise a certain amount of capital in order to be operationally viable. Additionally, they wanted to achieve a high valuation from investors. TPG, a private equity firm, met both needs by investing $450 million and valuing the large media company at $5.7 billion.

However, the high valuation led to a deal that would require Vice Media to make large payouts to TPG. More specifically, between 2020 and 2024, equity payments could add up to almost $400 million.

The deal was made when Shane Smith was the chief executive. Today, Vice Media is run by Nancy Dubuc, who previously served as vice chief executive. She focused on renegotiating the deal with TPG and also developing new revenue streams.

In terms of developing new revenue streams, Dubuc has sought to decrease the reliance on ad revenue. As of now, a third of Vice Media’s revenue is through ad sales. However, it is not feasible to rely only on ad money as Facebook and Google crowd out other companies and completely dominate the online ad sales industry.

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Economics, Finance and Investing