Internet IPOs seem to be flying and filing to go public faster than Dennis Rodman can go through a hairstyle change. And that’s fast. This past week we count a dozen Internet companies lining up at the free-throw line with the highest profile one from the “shock jock” of financial journalism Jim Cramer’s TheStreet.com.
The stock market commentary Web site plans on raising as much as $75 million on shouting value alone. We estimate underwriters led by Goldman Sachs may price the works with initial market cap of $300 million, or about 67x trailing year revenue and what we think could be 30x 1999 revenue.
How does its offer compare to the other Internet IPOs of 1999? Let’s take a look. On average the 8 IPOs in internet.com’s IPODEX raised about $60 million, so TheStreet.com’s $75 million pushes the envelope a little, although it hasn’t disclosed price per share or shares offered yet.
A majority of the Internet IPOs beginning last Fall have priced at the top or above range, as well as offered more shares. We expect TheStreet.com to do the same. Other more recognized names on deck are Marimba and eToys.
As a group IPODEX is up 162% from its average IPO price per share, although that’s not the price most investors would have paid.
TheStreet.com reports 37,000 paid subscribers who’ve ponied up $99/year. In the newspaper world that’s the equivalent of a small-town newspaper, which would be valued at about $500 per subscriber or $18.5 million. Newspaper this is not, however.
TheStreet.com will probably rocket based on the brand recognition among the daytrading cowboys who bump, pump and dump Internet stocks on debut.
The real question is does TheStreet.com have a long-term investment outlook? TheStreet.com generated $4.5 million revenue in 1998 — ads were $2.5 million, subscriptions $1.7 million and “other” was $393k. The financial news site had $16.3 million net loss for the year.
On February 22, the day before TheStreet.com filed, New York Times Co. invested $15 million in the firm. TheStreet.com has raised more than $50 million. Venture backers include Softbank, Chase and Oak.
Larger rival MarketWatch.com (NASDAQ:MKTW) went public in January and raised $53.7 million. It has a formal relationship with co-owner CBS for promotion, a critical element in the war for eyeballs and market mavens.
The aftermarket performance for Internet IPOs has been mixed but on the bullish side for sure. Overall IPODEX shows the group trading 37% off its blended highs and 30% better than its lows.
% of high
% of low
We estimate MKTW trades at about 65x 1999 revenue and think that may not be sustainable for a content-driven site. The key difference between the two is MarketWatch content is free and its editorial product more “reporting” than TheStreet.com, which is more “commentary.” TheStreet.com plans on more free content but targets 100,000 subscribers this year.
We think ultimately that a larger media outfit — maybe the NYTimes Co. — takes out TheStreet.com and integrates it into the media reach of the newspaper’s own Web sites, which haven’t caught on to large degree versus the more nimble Web-centric efforts.
Overall TheStreet.com has done a good job of growing its brand presence and has hired some very talented talent. Herb Greenberg, for one, was a high-profile market muse for the San Francisco Chronicle before joining TheStreet.com.
The ultimate challenge for TheStreet.com is proving it’s more than a sounding board for Cramer, who appears on CNBC regularly, and that its voices can attract the revenue and earnings it will need to keep Wall Street tuned in if the vein-popping style stops.
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