Would TheStreet.com Be Worth More Without Jim Cramer?

TheStreet.com (Nasdaq: TSCM)’s 10-Q report warns that the loss of its co-founder and Chairman of the Board Jim Cramer “would have a material adverse effect on the Company.” For a long time, I assumed that was true. After all, Jim Cramer had become the public face of TheStreet.com and RealMoney.com. But does Cramer still add value?

Cramer did a masterful job positioning himself as the emblem of the last bull market. Sometimes serious, sometimes a buffoon, Jim Cramer was always in the spotlight. As my friend James Altucher points out, some of Cramer’s calls were brilliant. But many were absolutely horrid (Bear Stearns, anyone?). In the end, Jim Cramer became so in love with pounding his fists on the table for the cameras that he completely lost sight of the impact this carnival could have on the investing public.

In a now-famous video clip (part1, part2, part3), Jon Stewart correctly called Cramer to task for these antics:

STEWART: Now why, when you talk about the regulators, why not the financial news network? Isn’t that the whole point of this? CNBC could be an incredibly powerful tool of illumination for people that believe that there are two markets: One that has been sold to us as long term. Put your money in 401ks. Put your money in pensions and just leave it there. Don’t worry about it. It’s all doing fine. Then, there’s this other market; this real market that is occurring in the back room. Where giant piles of money are going in and out and people are trading them and it’s transactional and it’s fast. But it’s dangerous, it’s ethically dubious and it hurts that long term market. So what it feels like to us—and I’m talking purely as a layman—it feels like we are capitalizing your adventure by our pension and our hard earned money. And that it is a game that you know… That you know is going on. But you go on television as a financial network and pretend isn’t happening.

CRAMER: Okay. First, my first reaction is absolutely we could do better. Absolutely. There’s shenanigans and we should call them out. Everyone should. I should do a better job at it. But my second thing is, I talk about the shorts every single night. I got people in Congress who I’ve been working with trying to get the uptick rule. It’s a technical thing but it would cut down a lot of the games that you are talking about. I’m trying. I’m trying. Am I succeeding? I’m trying.

STEWART: But the gentleman on that video is a sober rational individual. And the gentleman on Mad Money is throwing plastic cows through his legs and shouting “Sell! Sell! Sell!” and then coming on two days later and going, “I was wrong. You should have bought, like-I can’t reconcile the brilliance and knowledge that you have of the intricacies of the market with the crazy bullshit you do every night. That’s English. That’s treating people like adults.

CRAMER: How about if I try it?

STEWART: Try what?

CRAMER: Try doing that. I’ll try that.

But he didn’t. The Mad Money show continues to treat the market like its a big joke, at a time when its viewers most need serious advice. It didn’t need to be that way. As RealMoney readers know, there is also a side to Cramer that is measured and insightful. Unfortunately, he reserved that side for his written work.

This week’s Time Magazine interview won’t help. Jim Cramer comes across as mean-spirited, revisionist, and egotistical to the point of self-delusion. Cramer actually says that if Jon Stewart knew more about him, “I think he would have thanked me instead of attacked me.” Then Cramer gets down to brass tacks knuckles:

I think CNBC’s done a remarkable job [to explain the market meltdown], and I think the attack on CNBC and the attacks on me were gravely misplaced. It was rather remarkable in that it was so clear that his goal was to just destroy me. One day he’ll answer for it.

That bloodthirst might feel good to Cramer, but is it good for TheStreet.com? I doubt it. At some point, Cramer the showman becomes a liability to the company he founded. We may have crossed that line.

Looking at the numbers, its hard to believe that TheStreet.com would be worth less if Cramer left. TSCM now has a market cap of $56.64 million. That’s considerably less than its $80.1 million in cash, restricted cash, and marketable securities. TSCM has no debt, but it has issued preferred shares with a liquidation preference of approximately $55 million.

Besides the trove of cash and securities, there are at least four other reasons why TSCM might be worth more, either as a standalone or to an acquirer, without Cramer:

1. Trophy properties. TheStreet.com and RealMoney websites are trophy properties even in this down market. They generate a ton of traffic, and have a deep bench of contributors (Kass, Fitzpatrick, Altucher, Rothbort, etc.). They do not rely on Cramer for content, and in my opinion could sustain most (though not all) readers if Cramer left. TheStreet.com and RealMoney.com are viable operating businesses that generated positive free cash flow even in the dismal stock market that prevailed last quarter. TSCM’s share price does not reflect their value.
2. Domain names. Even without the websites, TSCM owns several valuable domain names: thestreet.com, realmoney.com, mainstreet.com, bankingmyway.com, and promotions.com. Together, these are probably worth at least $10-15 million.
3. Easy changes could generate cash and increase profitability. Sell off non-core assets like Promotions.com. Fold the premium products into RealMoney.com. This will not only help retain RealMoney subscribers, but will free up ad space otherwise used to pimp upsell good, paying customers.
4. Huge tax asset. As of March 31, 2009, the Company has approximately $128 million of net operating loss carryforwards. A profitable suitor could put those to good use. Yahoo? Microsoft (MSN Money)? IDC? Who knows.

My take: I don’t own currently own TSCM. And for the first time in at least eight years, I’m not a subscriber to the RealMoney paid product. I let my subscription lapse, instead turning to alternatives like Minyanville (a more compelling product run by ex-RM editor Todd Harrison) and Seeking Alpha (note: I’m syndicated by SA but would read my favorite contributors there daily either way). But depending on how the stock reacts to Cramer’s latest hissy fit, I may take a stab at TSCM shares as a deep value play.

DISCLOSURE: No position.

Comments

[Augustus:]

Crammer has used TSC as a self promotion vehicle. He has been in charge as the stockholders have been plundered. If there was a true Wall of Shame for corporate leader screwups, Crammer would be the shining star of the display.

May 17 09:07 AM

[Daryan:]

Thestreet.com would be worthless sans Cramer. Easy to attack, but irreplaceable to many different business enterprises, CNBC included. To think otherwise is simply a flawed argument and would simply be allowing ones personal feelings on a target to cloud one's analytical judgment.

May 17 09:35 AM

[wineman:]

I can't really offer an opinion whether thestreet.com would be better off with or without cramer, but I think he does a terrific job with his show. I also believe he was unfairly blind sided by Stewart (very unfairly so) and froze. He certainly embarrassed himself. With his TV show...yes, he rants and raves, exaggerates, and at times acts the buffoon. Yet he is very knowledgeable, offers terrific strategies, that are more valuable than his stock picks, which are as on the money has anybody else on TV. Yes he's made bad picks, but in todays market, it's close to a crap shoot, and know of no so called "expert", much less a broker, that gets it right most of the time. It's impossible..and almost changes by the day. And I believe he has to use the form of entertainment that he does to keep the everyday consumer interested. The world of finance is an amazingly boring topic for most people, and Cramer's "act:" does a good job of keeping the consumers interest by entertaining them while they learn.

May 17 11:30 AM

[User 406616:]

No matter how CNBC pumps up Cramer, we simply have to treat his advice as another datapoint in a complex marketplace. Of the thousands of stocks available for investing, he does great service by narrowing down the headliners with oneliners. I, for one, have used his advice as a stepping stone for further research - not as a substitute to blindly invest in equities.
Yes, you win some and lose some - but to lay it all at the feet of one man when the chips are down seems patently unfair.

May 17 12:38 PM

[henarl:]

Cramer, like Jon Stewart, is an entertainer. Neither qualifies as an investment expert. But, the world needs entertainers as well as experts.

May 17 03:17 PM

[Northstar10000:]

TSCM has another down leg no matter what happens with Cramer.

May 17 04:38 PM

[JMP:]

Cramer is a fool JMHO. He is nothing but empty headed antics. He is irritating and I cannot believe anyone would rely on this fool for investment advice. I don't even care if it is good advice (which it is not) ...he treats it all like a joke. Cramer SOOOOOOO missed the point on the The Daily Show....the point is the premise of CNBC is good, but they miss the mark by a mile.

Try Bloomberg if you want to watch some worthwhile investment television.

May 17 04:56 PM

[Baboon:]

Cramer is an entertainer posing himself as an expert. And that is dangerous for his some of his gullible viewers. I wonder how many people actually made money with Mr.Cramer over the long run? Instead of making smart predictions about the next market move down he is 'trying' to hold off the market's fall by artificially manipulating the prices with the uptick rule. Because of course stock prices in a free fall are bad for his reputation and his credibility. Stock prices were falling so fast before he even realized that there is not 'always a bull market somewhere'. 'Stocks need speed bumpers on the way down'. Anything goes that will help Mr. Cramer and his show. Even the uptick rule.



On May 17 03:17 PM henarl wrote:

> Cramer, like Jon Stewart, is an entertainer. Neither qualifies as
> an investment expert. But, the world needs entertainers as well
> as experts.

May 17 06:10 PM

[FloridaBoy2:]

On May 17 12:38 PM User 406616 wrote:

> No matter how CNBC pumps up Cramer, we simply have to treat his advice
> as another datapoint in a complex marketplace. Of the thousands of
> stocks available for investing, he does great service by narrowing
> down the headliners with oneliners. I, for one, have used his advice
> as a stepping stone for further research - not as a substitute to
> blindly invest in equities.
> Yes, you win some and lose some - but to lay it all at the feet of
> one man when the chips are down seems patently unfair.

Cramer is just Cramer. You love or hate him. He has some ideas that are worth further research and does dispense some good advice. I have to give him credit for the entertaining way he explains the basics of investing to the 'home gamers'. He is self deprecating but certainly not a fool. Anyone who pulls the trigger on any stock recommended on TV with out further research....is the dunce. He does have pay services and is not going to shoot himself in the foot.

His value to the site? Quite high methinks. I see value in the shares too but it may go unrecognized for a long time.

All of us would like to have a crystal ball for market decisions but it does not exist.

Disclosure: I just started a trial of Real Money. I am not sure if I will stay with it but it may be worth the $129 for 12 months. Cramer's take there is more focused than the generalities of his show which is after all a TV show.

May 17 07:58 PM

[Momintn:]

Cramer has a huge following because of his tv program. And he mentions thestreet.com quite a bit. I'm sure they get alot of traffic because of Cramer, that otherwise they wouldn't get.

May 17 09:11 PM

[Michael Comeau:]

Your point on the value of the domain names is interesting - those are truly significant off-balance sheet assets. But Cramer is still key to the franchise. The traffic he generates is key to generating subscription revenue and introducing readers to other contributors.

Jun 02 07:48 PM

[cos1000:]

I don't really understand how you can call these domain names "off balance sheet assets". They are part of the "Goodwill" and "Other Intangible Assets" on the company's balance sheet. With the last to quarters reported, Q4 2008, and Q1 2009, these "Assets" already suffered an Interim Evaluation Impairment Charge.... Bringing the Q4 quarter from $53.6M to a Q1, 2009 reported value of $30.4M. Although I realize that the domain names may still be worth something.... just saying there is definitely a problem with the current business model, in these dollar conscious times....

Oct 04 10:20 PM