Like my friend Josh Brown does, I often don't know where I will end when I start writing… I know I have something to say, given my own time writing for RealMoney.com, and now having publicly written on financial matters for over eleven years, with thanks to Jim Cramer, who gave me my start.
Photo Credit: Penn State
Recently, a 9% holder of TheStreet sent a letter to Jim, asking him to either sell off TheStreet in an auction or leave CNBC and rebuild the value of TheStreet. The Stock rose roughly 7% on the news. Personally, I don't think it should have budged. Here's why:
1) What is a perpetual money-loser worth? TheStreet hasn't earned significant money since 2007.
2) What is TheStreet worth in an auction? The complainant says:
Despite these improvements TST trades at an enterprise value to 2015 estimated revenues of 1.3. This compares to BC Partners Limited's acquisition of Mergermarket Group at three times revenue. Morningstar Inc. (“MORN” – $65.97) trades at 3.4 times 2015 consensus revenue estimate. Allegedly, BoardEx competitor Relationship Science recently raised capital at a $300 million valuation compared with its purported $5 million revenue for 2013.
TheStreet is not comparable to these in my opinion. I'll use Morningstar as my example: it is a comprehensive site offering a wide amount of data about investments, and relatively light on opinions. Where it speaks, it is authoritative, and it has a relatively sticky following, making their revenues more valuable than that of TheStreet. Let's be real… would you buy TheStreet at the same enterprise value to sales ratio as Morningstar?
3) Selling investment opinions is a very competitive business, with low barriers to entry. If a party is any good at marketing it, and wants to sell a newsletter, there are a lot of people who will buy, as noted later by the complainant:
