How many of you drive a GM Vehicle or even yet still see a GM commercial every now and then? I bring this up because GM is one of many corporations still active today that has gone through Chapter 11 Bankruptcy. When people think Bankruptcy they generally think liquidation, whereby assets are sold off piece by piece, the organization is shut down, and the creditors take a massive haircut as the corporation discharges it’s obligations.

While that can generally be true of Chapter 10, in Chapter 11 it’s a more ordered and clean process. Understanding Gawkers situation one has to realize Gawker isn’t insolvent it can still make payroll, Meaning our friendly neighborhood kinja technicians, and our main page writers are still doing their thing. It just has a massively onerous debt over it’s shoulders - the Hogan verdict which it needs protection from.

That is the key here, protection, you see had Gawker not done this Hogan would effectively have been able to take a “lien” on Gawker’s assets. What this would effect would effect be is Hogan would be the new owner of Gawker media. He’d then likely be able to to sell those assets which would result potentially in the entirety of Gawker media coming undone depending on how quickly he moves. However, chapter 11 puts a stay on all legal proceedings while the corporation goes through its restructuring and in this case sale.

Right now due to the protections afforded by Chapter 11 Hogan cannot touch Gawker Media which of course includes Kotaku. This is the real news of the day, Gawker Media now has a legal shield around it. Moving forward with the sale it’ll effectively protect Gawker from Hogan and further litigation and runs of its debt.

In the short run nothing much will happen or change. Will there be uncertainty? Sure, but the key take away is this isn’t liquidation which would happen if Gawker was fundamentally insolvent which according to their filings it is not.

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In the more long run what is the effect? Well nothing can really be known by this point sadly, which is why there is so much uncertainty. One thing seems certain Nick Denton will sell Gawker for the highest price possible, meaning there will be changes to the business model, which could effect us here at TAY and we’ll cross that bridge when we come to it.

The second will be the continued appeals of the Hogan verdict which brought us to this place. As Gawker could not pay the $50,000,000.00 bond requirement to continue appeals it forced Gawkers hand. Following the sale, the proceeds will be held in escrow by a third party pending conclusion of legal side of things. If the appeal succeeds the money will be paid out to Denton and Shareholders, if it fails to Hogan.

In short this is a defensive measure to push back against Hogan, the largest creditor of Gawkers now. After the proceedings is done there will be a new Gawker but I’m confidant it will still exist alongside Kotaku and us here at TAY, as Gawker is still a sound business.

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That being said it’ll be up to the new owners to see what happens. One potential buyer, Vox Media for example which owns Polygon could have wide ranging repercussions for Kotaku and therefore TAY but that is of course only speculation on my part.

For further reading check out the New York Posts story on the issue and my supplemental links I’ve embedded. They have some interesting information on the current Chapter 11 Filing and the upcoming proceedings of sale. If you have any questions on terminology, Chapter 11, or anything you’re unclear of I’ll be happy to answer.

PS: Can’t believe I just wrote a TAY post on insolvency...