Alan ABelson really worked over the creamer this past week-end since no one posted this , I figured I would
A recent article in the New York Times referred to James J. Cramer as a
Wall Street "triple threat." The phrase, borrowed from football, was meant to
be complimentary, of course, equating Mr. Cramer's formidable
multi-disciplinary achievements (he's a star of portfolio, print and TV) with the
now-obsoleted but once revered back who could run, pass or kick with
devastating dexterity. As it happens, "triple threat" is not entirely inapt as a
literal description of Mr. Cramer's performance in his various roles.
On television, for example, Mr. Cramer is an unfailing and formidable threat to coherence. In print, he's a threat to objective journalism, since he's an unremitting practitioner of subjective journalism, with only one subject- himself. And, as hedge-fund manager, Mr. Cramer, whose portfolio was up all of 2% last year (after fees, although what the fees were for, we're not clear), is manifestly a threat to the financial well-being of his limited partners.
To recognize Mr. Cramer's peccadilloes in no way diminishes the awe that he
inspires in us as someone who never stops talking, but never says anything. A faculty so rare, so daunting to emulate, can be viewed only as a very special gift.
But what prompts mention of Mr. Cramer is only incidentally to pay him our respects. He merits notice here less as a kind of retrograde Renaissance man than as creator and owner-operator of TheStreet.com, an Internet financial news service that he plans to take public.
The dot and "com" are automatic guarantees that the IPO will be a smash. Why do we think it won't hurt, either, that big, big fans of Street.com are the throngs of quick-draw traders who rove the wild Web? The combustible mix of Promo-man Cramer, trigger-happy Internet crowd and multitudes panting for the next online new issue suggests the sky's the limit on this one.
And all the hyper-hyperventilating and super-pyrotechnics we envision will be fully justified by the
virtual outfit's fundamentals. For TheStreet.com fits beautifully the mode of all
the e-wonders that have had such spectacular stock-market debuts. It's a pup
of a company, shy on subscribers and revenues but with an abundance of red
ink. In another, calmer life, just the kind of thing you'd expect to find in a venture-capital kennel, one with a penchant for the odd breed.
Up and Down Wall Street, Part 2
Up and Down Wall Street, Part 1
More specifically, according to the registration statement, Street.com claims
37,000 subscribers; it had revenues last year of $4.6 million, on which, no
mean feat in itself, it lost $16 million. Both subscribers and revenues were up
substantially from the figures of 12 months earlier and, not to be outdone, so
was the loss.
A novel marketing program swelled the subscriber ranks in the fourth quarter by 5,500, a ponderable number on a very slight base. The program enabled air travelers to swap their frequent-flyer miles for an annual subscription to Street.com (the majority of subscriptions are month-to-month).
Street.com gets not a penny from signing up these happy flyers; indeed, it
must pay a third party a "nominal amount" for every one snared.
Just how the Internet equivalent of a circulation audit bureau would classify such subscriptions is problematic, since they patently don't meet the usual definition of "paid." Perhaps they deserve a brand-new category of their very own-"bartered"?
Paying customers are nice to have, but for any publication, virtual or real, the
key source of revenues is often ads and at Street.com in '98, advertising chipped in palpably more to the pot than subscriptions (55% versus 36%). A grand total of five advertisers accounted for no less than two-thirds of all ad revenues and the biggest of these contributed 40%. We'll boldly observe that this is not exactly a broad-based roster and intimates a certain troubling dependency.
Moreover, as the company rather mournfully concedes, online advertising is
still very much an iffy business. It cites, for instance, the absence of standards
to measure the effectiveness of Internet ads (a hopelessly finicky group,
advertisers insist on some way of telling whether the dollars they spend yield
results). And, if standards do evolve, it's impossible to say what the impact
will be, for better or worse, on Street.com.
Nor, try as we might, can we see as terribly bullish for Street.com or any other company for which advertising revenue is critical the emergence of software that blocks ads from cluttering up a Web user's computer screen.
But the real vulnerability of Street.com is to the stock market. A creature,
very much like its prominent cofounder, of the bull market, its users are
investors, its advertisers are companies that cater to investors. Unlike, say,
Forbes, Fortune or, forgive us our chauvinism, Barron's, its subscriptions and
its advertising are bereft of all but a smidgen of nonfinancial leavening.
Should the market reverse course or even stumble badly, the effect on Street.com would be huge and ugly. And, in fact, when stocks suffered a spasm last year in the third quarter, both subscription and ad revenues declined.
If profits have proved elusive and revenues modest so far, Street.com has demonstrated a remarkable ability to attract money. Last year, to illustrate, via private placements of unregistered securities, it raised $10 million in May and another $25 million in December.
Last month, what's more, the New York Times became the company's third
largest shareholder when it plunked down $15 million in "cash and services"
for 1.3 million of the common and a parcel of 9 ½ % convertible preferred, an investment easily as valuable in cachet as in cash.
We've no doubt all kinds of "strategic" considerations were behind the Times'
decision to invest in Street.com. Among such considerations possibly was the
imminence of a public offering. Not that we blame the Times, understand. Who can resist the chance to get a piece of a potentially sizzling hot new issue before it goes public? And the Times' timing at least was admirably strategic, since the announcement of its investment came a day before the disclosure that Street.com planned to go public.
It seems evident that the great draw for those investors blithely pouring
millions and millions into Street.com's spongy coffers has been the prospect of
a dynamite IPO. No accident, we submit, that all of the convertible securities,
like those the Times owns, convert into common when the company makes its offering. However diverse their backgrounds and disparate their professed reasons for committing their funds, looming up before their beady eyes was a fully-loaded gravy train, beckoning them to get on board.
Terms of Street.com's offering have yet to be firmed up. But we do notice that a fistful of options are outstanding to the worthy folks at Street.com, exercisable at 12 cents a share. Which leads us to conclude the shares will be offered to the salivating public at more than 12 cents a share.
Mr. Cramer, we'd be derelict in failing to note, until quite recently apparently had not been compensated in coin for his yeoman-like labors for Street.com.
(In May 1998, he did receive in lieu of a paycheck an option to purchase
66,667 shares at three cents apiece.) However, in February, he signed a new
employment contract as an "outside contributor" calling for an annual salary of
$250,000 and more options, on 333,333 shares, to be exact, at $3 a share
(indicating the IPO price will be more than $3 a share). He's already the
largest stockholder.
The new contract also provides for a 10% annual raise, unequivocal evidence
that, as lead commentator for Street.com, Mr. Cramer expects to get at least
10% better each year.
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