One especially impressive survivor from the pre-bubble era is TheStreet.com – just one analyst covered the $250 mn company as recently as 2002, but now there are six. During the same period, TheStreet.com, which was founded in 1996 and encompasses websites, email subscription services, print, radio, syndication and audio and video programming, has seen its shares rise from under $2 to nearly $12 as of April.
IR magazine sat down with Thomas Clarke, chairman and CEO, and Chaela Volpe, IR manager, to talk about the challenge of doing investor relations when virtually no one is listening.
What was TheStreet.com’s analyst coverage like during and following the boom?
Clarke: We went public in May of 1999, when we had seven companies covering us. In 2002, when the ad market imploded on the web, we went down to one, Thomas Weisel; that lasted until about the middle of 2003, when we picked up Avondale Partners as well.
This situation continued until 2005, and then it was only Avondale. It was the middle of 2005 when it became a real priority for us to increase coverage. I thought we’d cleaned up our message to the Street, following a strategic decision I made to close our independent research division.
All that led to the decision to bring in someone like Volpe to help with the IR effort.
Why did so many analysts drop their coverage?
Clarke: There was obviously the implosion of the dotcom bubble. Also, there were full-service brokerage firms moving away from micro and small-cap research. That presented a unique problem because we fell into the micro-cap category. One other thing we had to contend with was size, as in liquidity or trading volume, which comes into play when you’re trying to attract coverage.
We had one other unique circumstance. In the later part of 2002 we launched an independent research company. As soon as we did that, I think the sell side believed we were in competition with it. Not only did it stop coverage of us, but it stopped inviting us to speak at conferences or events. From an IR perspective, that is a very hard obstacle to overcome. I closed down the research group in June 2005 – this instantly opened us up to conferences again, and analysts started to show renewed interest in the story.
Volpe: I think the most outstanding company-specific issue I noticed as soon as I joined was the widespread misperception that the company is dependent on James Cramer for its success. Many people attribute our traffic and popularity to the ‘Cramer effect’ and link the upswing in our popularity to the start of the TV show Mad Money in 2005. Once they hear us out, however, they learn there were other factors at play and that the Mad Money audience comprises only a small fraction of our traffic.
The increase in our popularity is a result of our push for free content rather than paid subscription services, which, along with the closing of our research division, enabled Cramer to go out and interact more with the investment community. My challenge has been getting people not to focus solely on Cramer and to see that over the past 10 years we’ve built brand credibility and recognition based on the timeliness and reliability of our services.
What did you do to build analyst coverage?
Volpe: I rely heavily on Thomson First Call, which has a coverage matrix showing a list of analysts covering our peers. I try to look every other month or so, and generate my target list based on the number of peers each analyst covers and the length of time they’ve been covered. Then I look back historically to see if those analysts covered us in the past. I try to find out how much analysts have on their plate to determine whether or not they are likely to be interested in covering us.
I keep track of most things through email, mainly because analysts are often not as receptive to cold calls. I’m very sensitive to the analyst’s calendar, too. I don’t invite people to our earnings call if I know they cover a company that has a call at the same time. That shows I’ve done my homework.
I’m accommodating and flexible: if they can’t make the call, I send them the webcast information, or maybe the transcript, and follow up that way. Being able to offer access to management is a huge part of the process; in addition, Cramer and Eric Ashman, our Cfo, are very accessible, which is a huge help.
Any advice for other firms looking to increase their analyst coverage?
Clarke: The one thing companies must do – and I know we did it – is to really look at who you’re trying to attract from the sell side. You have to decide who will understand the story and who will do the work to get the story out – you can’t just say to an IR person, ‘Go get me coverage.’ We had people covering us years ago who I didn’t want covering us because they weren’t spending enough time on the story.
They were doing a bad job – and I don’t just mean they were underperforming. It all boils down to the analyst understanding the story and being willing to do the homework. We wish everyone had a buy on us, but that’s not always going to happen.
