On Friday evening, the independent company issued a press release, announcing that it had “initiated voluntary proceedings under Chapter 11 of the US Bankruptcy Code to preserve value and seek access to capital while the Company continues to review strategic alternatives”.
Those strategic alternatives are the firm’s hope for addressing its over-leveraged balance sheet. The proceedings do not mean that Sizmek will not be doing business. A representative of Sizmek’s Australian business told AdNews that “The US Chapter 11 process – unlike bankruptcy schemes in other geographies – is specifically designed for companies like ours to operate as usual while working to resolve financial issues”.
Sizmek’s bankruptcy filing estimates the value of its assets at between $100m and $500m, with its liabilities in the same range. Some of its largest outstanding debts are staggering: Index Exchange is owed $8.9m, PubMatic $7.3m, OpenX $5.9m, and AppNexus $5.3m. Six further creditors are owed more than $1m. It reflects the shaky grounding on which ad tech firms’ financial positions are built, namely that they must front the cost of inventory before they themselves receive payment from marketers.
According to Adexchanger, the company was acquired over 2016 and 2017 by Vector Capital, a private equity firm, which spent a combined $122m on Sizmek and a further £145m on the predictive marketing software firm Rocket Fuel, which it planned to fold into Sizmek.
Vector aimed to follow a model that other private equity firms had used in the ad tech sector: buy, consolidate personnel and tech costs, then sell to a larger buyer. The problem was that Sizmek couldn’t return to profitability.
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The filing comes as significant questions hover over the entire sector, with potential changes to Google Chrome, which has a 62.5% market share among browsers, and Marketing Platform. These, which Adweek reported are currently under discussion, could see targeting restrictions at the browser-level, and could have colossal impact on the ad tech sector.
In an October 2018 report on global ad tech players from the research firm Gartner, Sizmek was considered a visionary: high on vision but low on execution. It noted that despite consistently good performance on conversion-based campaigns, an efficient workflow, and an ability to serve small and midsize clients, there were problems. These included issues around product reliability and post-launch technical support.
Sourced from Sizmek, AdNews, Stretto, Adexchanger, Adweek, Gartner