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This is the last email you will receive from TheStreet.co.uk. We are closing down today.
We hope you enjoyed the site - we enjoyed producing it. At the last count, there were 180,000 registered users and we thank all of you for reading us. We like to think we showed how quality, entertaining financial journalism should be done on the Internet.
TheStreet.com (NASDAQ: TSCM), which today took full control of TheStreet.co.uk, took the decision to close the site in order to cut its costs. All the staff here are being made redundant.
It's another Internet collapse - but one with a difference. TheStreet.co.uk hit all its financial targets during its brief life, including cashflow. It will be an orderly wind-down.
So, thanks to all our readers and advertisers.
We'll miss you.
TheStreet.co.uk and its parent company TheStreet.com (NASDAQ: TSCM) is of course a competitor of The Motley Fool's in the UK and in the USA, but it gives us no real pleasure to see that they are giving up the ghost and closing the UK operation. You have to feel for the people in the UK who have worked hard setting up the business, and who now have to go and find a new job: but it shows that reality is continuing to dawn on all internet companies, and in particular on financial information companies. Ultimately, they have to make a profit, or they won't survive. But does that mean that all providers of financial information on the Internet should watch out?
TheStreet.co.uk lost $9 million in the first nine months of this year, and the U.K. operation would have run out of money by the end of the year. Neither TheStreet.com nor any of the UK investors was prepared to provide the additional funding required to get the UK company to profitability a few years from now.
Does pulling the plug means that, at last, TheStreet.com is confronting its problems? TheStreet.com owns 63% of the UK company, and a $9 million loss looks small when compared to TheStreet.com's losses of $37 million for the nine months ended September 30, 2000; so why are they really closing the UK operation now? With $90 million in cash, I am sure that they could have funded the UK operation for some time yet.
One major problem for TheStreet.com was that when they set up the UK operation they entered into what now appears to have been a completely daft agreement. When they set up TheStreet.co.uk they promised their UK investors that in the event of a change in control of TheStreet.com, the UK investors had the right to require the TheStreet.com to purchase their shares in the UK company for $34 million, increasing to $42 million after September 11, 2001. This figure valued the UK business at over $120 million, which is more than the current market capitalisation of TheStreet.com (just $102 million). This agreement with the UK investors effectively meant that the prospect of any form of takeover of TheStreet.com was impossible. By "buying out" the UK investors for just $3 million in cash and 1.25 million shares in TheStreet.com, the company has opened the way for a takeover approach -- is this the real reason for the UK arm's closure? Only time will tell.
It is amazing to think that earlier this year the market value of TheStreet.com was $2,448 million -- was this Internet madness? No, it was nothing to do with the Internet, but it certainly was to do with investors becoming blind to the possibility of failure. So, Fools, we wave goodbye to TheStreet.co.uk and wish the best to its staff.
Where Next?
• Announcement report -- TheStreet.com