Taking TheStreet.com Private (TSCM)

TheStreet.com’s (TSCM) share price is down far enough that the company’s management must be giving some consideration to taking Cramer & Co. private. At $3 a share, the stock is down from a 52-week high of $16.74.

TSCM has a market cap of $92 million. The latest 10-Q shows $78 million in cash and marketable securities and taking out depreciation and amortization the company broke even last quarter. However, operating expenses were up 40% from the same quarter a year ago. That can probably be fixed.

TheStreet.com is out of favor for the same reason that many media companies are, but its revenue was up slightly in the third quarter and it might not need to stay that high for the company to make money. Most of the firm’s sales, $10.2 million out of the operation’s $16.7 million for the last quarter, came from services. Advertising revenue, which is probably more vulnerable to the economy, accounted for the balance.

TheStreet has some expenses that would disappear if it was private. The company has a dividend of $.10 a year. It has a float of almost 30 million shares. Its costs for being public are probably in the arena of $2 million. Jim Cramer makes $1.3 million a year, and that goes up each of the next two years. Aside from operating cost cuts, there may be $7 million in savings if TSCM were private. Take out 10% of operating expenses and the number could go as high as $14 million. That probably give TSCM enough cash-flow to support the cost of buying out its public shareholders.

The issue is what the management would have to pay to go private. At a 50% premium, the number would be $4.50 a share, making the total price $135 million. With all of the costs that could be cut, if the stock goes much lower, the case for going private gets attractive.

Douglas A. McIntyre