Under the agreement, Go2Net and Vulcan Ventures, the investment firm of Microsoft co-founder Paul Allen, will purchase 5 percent of TheStreet.com's outstanding stock at $5.56 a share. In addition, Go2Net and Vulcan Ventures have received options to purchase an additional 7.5 percent of the outstanding stock at $13.50 a share during the next six months.
The shares of several Internet content companies have fallen on hard times.
|Company||Today's close||52-week high|
TheStreet.com has become a poster child of the fickle dot-com investment climate. Founded by celebrity trader James Cramer, the company saw its stock jump past $70 a share following its 1999 initial public offering.
Since then, the star has fallen for TheStreet.com and many other publicly traded Web publishers, as they faced difficulties in growing revenues and producing profits. Among the casualties are Women.com, culture magazine Salon.com and youth network Snowball.com--all of which are trading well below $5 a share.
Analysts said the investment is a vote of confidence in TheStreet.com and may give it a short-term boost. But some analysts noted that a cash infusion does little to alter the fundamentals of turning the corner to profitability. While the company does not face an imminent cash shortage, analysts warned that its expenses are high in relation to its revenues, raising red flags about the company's long-term prospects.
"Money infusion is temporary," said Ed Lopez of Internet research firm CyberDialogue. "What TheStreet has to do is figure out alternative ways to generate revenue without increasing their expense base."