TheStreet or Quit CNBC, Mad Investor Tells Cramer
By Sonali Basak
| Dec 3, 2014 11:20 PM
Jim Cramer has made a career out of doling out advice to investors
and companies. Now, a hedge-fund manager is turning the tables on the
At issue is
TheStreet Inc., the financial news company that Cramer co-founded
in 1996. With a market value of about $83 million, TheStreet is worth
just a fraction of what it was worth during the dot-com bubble and --
more recently -- just before the financial crisis struck.
J. Carlo Cannell, whose
hedge fund is the second-largest shareholder in TheStreet, thinks he
knows why: Cramer is spending too much time at his other job on CNBC,
the business news network where he hosts “Mad Money.”
“You are simultaneously an
employee of CNBC and a director, major shareholder and employee of TST,”
Cannell wrote in a letter to Cramer yesterday, referring to TheStreet
by its stock ticker. “To which entity do you ascribe your greater
To resolve this conflict,
Cannell is urging Cramer to do one of two things, either pursue a sale
of TheStreet or quit CNBC. The missive was disclosed in an SEC filing
yesterday by Cannell Capital LLC.
The letter is as
provocative as Cramer can be on TV.
“Resign from CNBC and
align your considerable energy and talents to helping your fellow
shareholders crawl back from Hades,” Cannell wrote.
Photographer: Scott Gries/Getty
Jim Cramer, who co-founded
TheStreet.com in 1996 and still writes and appears in videos for
the site, is the company’s largest shareholder with a 10 percent
Cramer didn’t immediately
reply to telephone and e-mail messages seeking a response.
On “Mad Money” the
59-year-old Cramer bombastically flogs his investment ideas --
accompanied by sound effects of roaring bears, snorting pigs, and
dump-trucks full of cash -- to a following that is large enough to
move shares of his picks and pans.
In a now-famous tirade on
the show in 2007, he
screamed that then-Federal Reserve Chairman
Ben Bernanke “has no idea how bad it is out there” and “we have
Armageddon” in the fixed-income markets. “The Fed is asleep!” he
Cannell owns nearly
9 percent of TheStreet, which runs a news and commentary website
and sells subscriptions to newsletters. Cramer still writes and
appears in videos for the website, is one of its directors and is the
company’s largest shareholder with a 10 percent stake.
The hedge-fund manager
also suggests Cramer take a pay cut as part of a full-time return to
TheStreet, complaining that his compensation is almost 5 percent of
the company’s market value.
“Why in the very worst
years for TST shareholders must you pay yourself more than $3.5
million per year?” Cannell asked. “How will you reflect upon on your
Company filings show that
Cramer is guaranteed at least $2.5 million a year in royalties,
another $300,000 in licensing, as well as stock awards.
“We’re proud to have
TheStreet’s founder, Jim Cramer, under contract,” Elisabeth DeMarse,
chief executive officer of TheStreet, said in an e-mailed statement.
TheStreet competes with
Cannell acknowledged that
DeMarse, who took her position in 2012, has been improving results at
the company by cutting expenses and with acquisitions including a
purchase of The Deal LLC, which covers mergers and acquisitions news.
In 2013, the company’s net
loss was $3.8 million, compared with an almost $13 million loss the
prior year, and revenue increased by more than 7 percent. Still, sales
in the year through September -- of about $59 million -- are well
short of their peak in 2008 of $71 million.
This isn’t the first time
a shareholder has called for a sale of TheStreet. Last July, Spear
Point LLC urged the company to hire a bank to consider strategic
alternatives, in a
letter filed to the SEC. Spear Point, which no longer holds its
stake according to Bloomberg data, said it was concerned that the
company was undervalued.
Cannell Capital was
founded in 1992 by J. Carlo Cannell with $600,000. It has grown to
manage $890 million in assets, according to its website. The firm buys
securities that mostly aren’t followed by Wall Street analysts.
The colorful language has
always been part of the fund manager’s style. In a 2005 letter sent to
BKF Capital Group Inc. (BKFG), an
investment adviser, Cannell invoked vice and corruption in ancient
“In 63 B.C., did Marcus
Tullius Cicero expose corruption and vice in the Roman Senate in his
First Oration Against Lucius Catilina,” Cannell
wrote then. “His words are relevant today.”
He exhorts Cramer to “now
suffer my opinions and recommendations” after referring to Cramer’s
“considerable non-pecuniary compensation” and “barren cranium.”
Cannell ends the letter on
a softer note:
“This communication may be
received with some frustration and perhaps a little embarrassment.
Please rest assured that my intent is merely and solely to help all
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