Frank Li

Suitors For TheStreet.com: Financial Media and Online Brokers?

Full disclosure before you read my comments: I'm short TSCM in my fund, and this isn't my real name because I want to remain anonymous. Now for the comments:

1. TSCM is not an acquisition candidate because of its dependence on Jim Cramer. Remember that the company was for sale for about a year, and nobody paid up, even when its stock price was considerably lower than it is now. An investment banker told me off the record that he looked at TSCM a few years ago for one of his clients, and concluded that the dependence on Jim Cramer totally ruled it out as a viable acquisition. Only this weekend, there was a Barron's article which argued that acquirers want user generated content, not editorial content, and that TSCM is also too dependent on Cramer: internet.seekingalpha....

2. You're right that the online brokers are battling for new accounts, but buying companies to provide free content to their clients isn't what they've done so far, and there's no reason to assume they'd do this now. In the examples you gave, remember that Ameritrade <b>partnered<... with Minyanville, as did Scottrade with Trade-Ideas. Subscriptions to Real Money are expensive; if Ameritrade gave them away for free, an acquisition of TSCM would be massively non-accretive and would require write-offs. More fundamentally, I suspect that the online brokers view their research and data offerings as ways to stimulte trades and maintain the loyalty of their current customers, rather than attract new customers, because people don't usually select a broker for its research. If Ameritrade or E*Trade acquired TSCM, I think their stocks would take a massive beating -- and that's a thought experiment that suggests that they shouldn't and wouldn't do it.

3. James Altucher is smart and stockpickr is a creative attempt at user generated content. But most people I talk to don't find it useful. And it now faces a crushing challenge from <b>Covestor and VesTopia</b> which provide real portfolios, not the artificial portfolios of stockpickr or the CNBC game or the Motley Fool's CAPS game. TSCM's acquisition of Weiss Ratings was much more meaningful financially.

4. TSCM is highly dependent on Yahoo Finance. Our fund's research suggests (unconfirmed, so check this for yourself) that TSCM purchases most of its traffic from Yahoo Finance and makes money on the spread selling ads at a higher price than it buys traffic for. The arbitrage business isn't that attractive to buyers, and also TSCM has squeezed almost everything it can from each visit: tons of ads on each page, and each article sliced into multiple pages. Soon it will hit a wall on revenue growth.

I'm not saying that TSCM won't do well in the near term. But I'd be amazed if TSCM was acquired as you predict.

Covestor and VesTopia: Winners and Losers from Peer to Peer Investing

Couple quick questions to all three of you (Covestor, VesTopia and Zecco):

1. Let's say I'm signed up for your services, and I'm buying an illiquid stock that takes me a few days to buy. Are you going to publish my trade immediately before I've finished assembling my position?

2. Is there a risk that people could use these services to manipulate stocks, say by assembling a great track record, getting their friends to buy a micro cap stock, and then buying that stock and publishing the trade, so all the followers would then go and buy the stock?

Covestor and VesTopia: Winners and Losers from Peer to Peer Investing

V. interesting. Another potential loser from this: TSCM, which acquired Stockpikr and does socially networked "play" portfolios. (I'm short the stock, and this isn't my real name.)

How much money do these services offer for each subscriber to your stock picks?