Gigaom Shuts Down, But Won’t File for Bankruptcy

Technology blog Gigaom announced that, unable to pay creditors, it’s discontinuing its operations, but it likely is not filing for bankruptcy.

In a post titled “a brief note about our company,” Gigaom’s management said it’s currently unable to pay creditors that have rights to all of the company’s assets. Gigaom said it doesn’t know what lenders plan to do with the assets, but “the company does not currently intend to file bankruptcy.”

The announcement seems to describe a situation in which Gigaom’s lenders are foreclosing on the company’s assets because they weren’t being paid. It’s a very common loan structure, with debt secured by corporate assets. And it’s exactly the kind of situation many companies file for bankruptcy to halt.

If a lender is on the brink of taking control of a company’s assets, the current owner sometimes will enter bankruptcy in a bid to keep the business. Another alternative is that through bankruptcy, a buyer will emerge. The asset could still winds up in the hands of a lender in bankruptcy, but it’s a more orderly process that encourages participation from all creditors.

Usually, troubled companies choose to file for these reasons. But it’s an expensive process, and that can sometimes keep companies away.

In a recent post in our Examiners series, Richard Chesley of DLA Piper said, “the costs of chapter 11 are taking a considerable toll on the smaller and mid-market chapter 11 cases. In these situations, liquidity is almost certainly constrained and access to time and financing is finite. In these cases, there is often a less costly, less desirable processes that companies are forced to consider.”

Gigaom didn’t return request for comment Tuesday.

Gigaom was founded in 2006 by Om Malik, who’s since left the site, and says it has a monthly audience of 6.5 million. The website’s coverage focused on topics like new technologies including cloud services, the media and Apple Inc.

However, Gigaom didn’t use the traditional advertising-funded model that has failed so many news organizations in recent years (although it does also sell ads). The company attempted to drive revenue by selling research and by hosting conferences.

A recent WSJ article about the tough competition for ad dollars among blogs quoted Paul Walborsky, chief executive of Gigaom, about the company’s model.

“There is no way you can have enough page views and scale to make enough money to support a great editorial brand,” he said.

Gigaom raised more than $22 million from six rounds of investor funding, according to CrunchBase. In 2012, GigaOM acquired paidContent for an undisclosed sum.

Write to Stephanie Gleason at [email protected]. Follow her on Twitter at @stephgleason