Oct 15, 2019

Warren takes aim at private equity after Splinter shutdown

Illustration: Sarah Grillo/Axios

Private equity's newest political headache came last Thursday when G/O Media shut down Splinter, a left-wing publication with 7 full-time employees. One day later, Elizabeth Warren placed the blame squarely on G/O Media owner Great Hill Partners.

Why it matters: Warren does have a plan to change private equity, but it wouldn't directly impact Great Hill Partners' ownership of G/O Media.

Context: After G/O Media shut down Splinter News, Warren tweeted: "Private equity firms are sucking value out of our companies, putting people out of work, and wiping out newspapers and digital news outlets like @Splinter_News. I have a plan to hold these firms accountable."

  • Great Hill formed G/O Media this past spring via the purchase of Gizmodo Media Group and The Onion from Univision. Splinter was part of Gizmodo, alongside several other sites that Univision had acquired via the Gawker bankruptcy (Deadspin, Jezebel, Kotaku, etc.). No pricing terms were disclosed, although Great Hill reportedly paid less than the $135 million check Univision had originally cut.
  • Great Hill did disclose that its purchase was all-equity. Managing partner Christopher Gaffney confirmed that with me yesterday, adding that there was no assumed debt, nor had any been put on G/O Media since the purchase.

Details: Warren's plan focuses on leverage, making private equity funds liable for portfolio company debt. G/O Media has no debt, thus wouldn't be affected by that plank of Warren's plan.

  • To be sure, this is where Great Hill obviously does have some strategic culpability, since it hired the executives overseeing Splinter's staff.
  • There also may have been search and social media algorithm changes outside of both of their control.
  • In terms of jobs, G/O told Splinter's 7 employees that there were 9 open editorial positions within the company, and that it hoped to enable internal transfers. But it's unclear if Splinter's staffers are qualified for those jobs. Moreover, editors of other G/O sites are said to have final say on hiring, so it's more about job opportunities than actual jobs.
  • Spinter's ex-editor didn't return a request for comment.

What they're saying: Gaffney puts the blame for Splinter's failure on the site's audience declines, which he says fell 75% from its Univision-owned peak, rather on than a lack of financial performance. "It had nothing to do with making money, because we co-mingle the audience for ad sales."

Splinter illustrates the fundamental flaw of one-size-fits-all policy prescriptions for private equity, whether from Warren or anyone else.

  • Same goes for universal criticisms or plaudits.

The bottom line: Private equity did kill Splinter, in the sense that Great Hill pulled the plug. But it shouldn't bear sole blame for the underlying disease that has spread throughout media, including among both those that do and don't have private equity backing.

Go deeper: Private equity takeovers result in significant job losses

Editor's note: This story has been corrected to reflect the company name is Splinter, not Splinter News.

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