With the ink still moist on its $US15 million deal with the New York Times Company, TheStreet.com registered with the U.S. Securities and Exchange Commission (SEC) for an initial public offering (IPO) this week. The financial news Web site plans to issue up to 26.3 million shares of common stock, for a price yet to be determined. The offering will be underwritten by Goldman Sachs, Hambrecht & Quist and Thomas Weisel Partners.
TheStreet.com's SEC registration illustrates many of the brutal financial realities involved with an Internet startup. In 1998, the company had revenues of $4.6 million. Although that figure is nearly eight times its revenues for the previous year, the site still lost $16.27 million in the same period. The filing also acknowledges how precarious the company's finances are: a single advertiser is responsible for 40 percent of TheStreet.com's $2.5 million in annual advertising revenues.
The company has also had to pay handsomely to attract talent. Chief Executive Officer Kevin English, who came to TheStreet.com last year, makes a $350,000 annual salary, with a bonus of up to $100,000. He is also entitled to hefty stock options and other perks.
On the plus side, the company evidently has Rolls Royce demographics. The registration cites a survey done by AtPlan of widely trafficked Internet sites showing that TheStreet.com has a higher percentage of male readers with portfolios worth $500,000 or more than any other site surveyed.
Moreover, the New York Times' investment of $15 million, announced on Monday, was enough to purchase 1.32 million shares of common stock and 37,728 shares of preferred stock. Based on that valuation, the entire company is worth approximately $300 million; if its IPO has an impact similar to that of CBS MarketWatch, it could well be worth much more than that.
TheStreet.com, which was founded in 1996, had previously been owned by a group of private investors, including hedge-fund manager James Cramer, who is also a columnist for the site. (TheStreet.com has an editorial relationship with The Standard.)
The Times -- a media conglomerate that owns television and radio stations, newspapers and paper companies -- rarely makes investments in outside editorial properties. And in some ways, the two companies are an odd couple. The Times is generally known for its staid, newspaper-of-record approach to the news, while TheStreet.com has cultivated opinionated, feisty and sometimes whimsical writing. The companies operate their Web sites on different business models: The Times' well-trafficked site is available for free, while TheStreet.com charges its 37,000 subscribers.
But the two properties may complement one another. Should an editorial alliance develop, TheStreet.com can offer the Times aggressive and specialised financial news reporting. The Times has national and international offline marketing clout to bring to TheStreet.com. And in light of TheStreet.com's IPO registration, the Times stands to be a substantial player in the Web financial news sector for a relatively modest investment.
The Times' investment means that the major financial news Web sites are now affiliated with huge media conglomerates: MarketWatch with CBS; CNNfn.com with Time Warner; Smartmoney.com with Hearst and Dow Jones; and Bloomberg with Bloomberg.