Founders of seven-month-old private equity group Spear Point Buyout Group, Nic Perkin and Ron Bienvenu, are two members of the growing population of entrepreneurs taking part in the rebirth of the city of New Orleans.
As of late, Spear Point has been seeing a bigger picture and pushing for a change for financial news and services website TheStreet.
Spear Point announced today that on July 9th, 2013 they sent a letter to the Board of Directors at TheStreet, challenging its current strategy and suggesting a rework. Spear Point suggested that TheStreet hire an outside financial advisor to seek alternatives for the company, including a potential sale.
Bienvenu and Perkin respect the company’s fundamentals, but largely see untapped value. The Co-CEOs see the potential and have even mentioned that they will make a bid for the company.
Bienvenu stated, “We own over 2% of TheStreet’s common stock and strongly believe that the company would significantly increase in value if it were to address its capital structure deficiencies. In particular, we urge the company to act now to eliminate the preferred stock overhang that diminishes value for common shareholders and inhibits the company from executing its stated strategy. We stand ready to work with the company on an initial offer for the company that we believe would be fair to all stakeholders.”
TheStreet was launched in 1996 aided by television personality Jim Cramer, who owns around 4.3% of the company. His roughly 1.3 million shares are worth $2.7 million. Other investors in TheStreet include Cramer’s charitable trust, Cramer Partners, and venture capital firm Technology Crossover Ventures (TCV).
TCV’s 11.5% ownership is in the form of preferred shares, meaning they have a higher claim on the assets and earnings than common stockholders. The company invested $55 million in TheStreet in 2007. Essentially, Spear Point believes the shares are preventing TheStreet from a buyout because a buyer would have to spend at least $55 million to make TCV whole. TCV declined to comment.
“The company’s capital structure creates an overhang that makes it difficult for the company to execute,” said Perkin.
Spear Point is hoping to bring new life into TheStreet by cutting costs and by removing the company from public markets. Bienvenu said their long-term goal is to fix the problem holding down TheStreet’s valuation, which is capital structure.
TheStreet’s market capitalization has dropped from $560 million in 2008 to $65.7 million today.
A bid from Spear Point, a self-proclaimed “transaction oriented activist fund,” could lead to a bidding battle, benefiting shareholders.
Beyond this potential deal, Spear Point hopes to acquire a number of other companies and relocate some or all operations to lower cost areas such as New Orleans.
Thanks in part to tax incentives and the overall business-friendly environment, New Orleans has become home to many startup entrepreneurs and tech savvy innovators.