What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing. If you follow the stock market at all, you're, probably familiar with jim cramer, the host of the mad money show on cnbc he's the most famous talking head in the financial media. By far and for good reason, he gives real analysis on individual stocks. While the same time, adding enough humor to keep the show entertaining while kramer has had a great career as a tv personality, his career encompasses much more than that.

He used to run a hedge fund and also founded a technology unicorn which achieved a 1.7 billion valuation. At its peak that unicorn is a digital financial media company thestreet.com thestreet.com is a website with financial news about the stock market similar to cnbc. It also has a premium subscription service called action alerts plus which gives stock recommendations to its readers. Unlike his tv career, the street.com was a complete disaster.

It ipo'd on the nasdaq, at the height of the dot-com bubble, achieving a peak valuation of 1.7 billion dollars. Unfortunately, the company failed to live up to the hype by 2019. It become a penny. Stock was delisted from the nasdaq and acquired for 16.5 million dollars less than one percent of its peak valuation.

In this video we'll look at how creamers started the street.com and why it ended up being such a massive flop. But first quick pause from our sponsors over at policy genius. If someone relies on your financial support, whether that's a child, aging, parent or even a business partner, you need life insurance to give you peace of mind. Typically, life insurance gets more expensive as you age.

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The link in the description or head to policygenius.com wall street millennial and answer a few questions in minutes. You can compare personalized quotes from top companies to find your lowest price, and now back to the video jim cramer started his career as a stock broker at goldman sachs in the 1980s. Eventually, he left to start his own hedge fund called cramerinco, where he managed 450 million dollars and took home around 10 million dollars per year in performance fees. While this would be enough to make most people happy kramer had even grander ambitions around the 1990s.

The internet started gaining steam and kramer saw the enormous amounts of wealth being created by new.com companies. He decided to combine the power of the internet with his expertise in the stock market by making a financial news website heavily focused on talking about individual stocks and in 1996. He did exactly that by co-foundingthestreet.com. The company started off small but was technically a dot-com company.

So investors immediately fell in love with the idea. The business model was simple: they would hire some staff writers to create articles about the stock market and financial literacy. They could make a little bit of money from advertising, but the real money would come from their premium. Subscription model kramer created the action alerts plus club kramer managed a portfolio of stocks for his charitable trust for a fee.

You could get access to a stock, picks and analysis before the internet. If you wanted to read stock analysis, you would have to read a physical newspaper such as the wall street journal or barons. There are some problems with that newspaper subscriptions are very expensive. They only come out once a week at most and there's a limited amount of information that you can fit on.

One issue: thestreet.com seemed like a great disruptive alternative. They can cut out the middleman and go directly to the consumer in real time and remember. This was all happening during the 1990s.com bubble, where any stock related to the internet was skyrocketing, regardless of how much money they were losing. The street.com was arguably a much better business than other.com darlings, like pets.com, which lost money on every order.

While the street was losing money at the beginning, they had basically zero marginal costs once they get enough subscribers to cover their fixed costs. Each incremental subscription falls straight to the bottom line. Also, jim cramer was already building a presence on cable news channels which provided great marketing for the company in the early years. They were burning cash as they spent aggressively on marketing and didn't even have enough subscribers to cover their fixed costs, but as fast as they could burn the money venture capitalists were willing to throw more down the drain in a recent mad money.

Clip kramer himself admits that the valuation given to the street.com was absurd and the investors were all but guaranteed to lose the vast majority of their money with the street. It was surreal. Suddenly our enterprise was valued at 25 million dollars. I had about 500 subscribers good lifetime valuation.

I was told, then, a few months later, with some decent uptake of our products, the venture capitalists valued the company at 125 million after we'd, already spent and lost the initial round of funding. Next thing you know we had a few more meetings, more investors, some journalism, big shocks, and now we got 150 million dollar evaluation, 25 million to 150 million, almost no time flat. More and more money gets lost until you finally come public and the stock opens at a billion dollar valuation, because there are many people who, like the product and buy the stock using market orders. The investment bankers keep back a lot to generate a boom vicious pop.

Needless to say, it should never have been worth that much fast forward a little bit. You have another losing quarter, except this time your publicly uh traded stock. It's slug, then another with another beat down, and eventually you find your money, your company, losing money with this stock in the single digits trading slightly above cash, we can use what kramer said to see just how overvalued the company was. They had 500 subscribers when they are raising venture capital funding.

As of last year, a one-year subscription to action alerts plus cost three hundred dollars, we'll assume it was a bit cheaper back then, when you adjust for inflation, so it's probably around two hundred dollars. This gave them one hundred thousand dollars of annual revenue. The venture capitalists gave it a 150 million dollar valuation for a price of sales ratio of 1 500. and remember this is revenue not even earnings.

The company was losing money. Things got even crazier when they ipo'd on the nasdaq achieving a valuation of almost 2 billion dollars. At this point, the company was trading for many thousands of times its sales. Also internet stocks didn't trade on their fundamentals.

Investors had gotten used to these types of speculative stocks only going up and just blindly bought, whatever wall street threw at them, hoping to double their money. Within a few weeks by 2001, the tech bubble had completely burst. The street.com stock price fell by 89 from a high of 600 dollars to just 10. At this point, things were looking bad for the company.

The company was still losing money and, with their stock price down, 98 it'd be almost impossible for them to raise more funds to survive, but they still had one extremely valuable asset. Jim cramer kramer had appeared on cnbc from time to time throughout the 90s and in 2005 he landed his own show called mad money. He quickly became a household name with millions of people tuning in every night to hear his analysis of individual stocks as well as the market as a whole. As kramer success on mad money continued to grow, he was able to drive more and more readers to the street dot com.

Their subscriber base grew and in 2005 they reported their first ever annual profit. The stock increased 26 fold from its 2001 trough to its 2007 peak and it looked like they were finally turning things around. But then the 2008 financial crisis happened as people lost their jobs and were foreclosed on their homes. They started cutting discretionary purchases subscriptions to the street.com were one of the first items on the chopping block for many families.

The stock got clobbered, giving up almost all the gains they had made in the early 2000s and while the rest of the market recovered, the street continued to bleed out destroying what little was left of their shareholder value. Post 2008. Their revenues were largely stagnant. Some years they'd go up in some years, it would go down.

Their operating income was negative, every single year from 2009 through 2018, as they had to spend heavily on marketing just to maintain their subscriber base. This might seem odd. Jim cramer's popularity on mad money was only increasing. Why wasn't the street able to continue growing its subscriber count? Counter-Intuitively kramer's resounding success at cnbc may have actually hurt the street in the long run for his roles as mad money host, as well as his appearance on squawk on the street.

Cnbc pays him an annual salary of about 5 million dollars. He only owns 15 of the street.com, which is losing money since he was making so much money from cnbc. He didn't have as much interest in the street and largely neglected it in 2011. He stepped down as chairman, while he still stayed on to run the action alerts club he didn't spend as much time promoting it for most companies when the chairman or ceo steps down it doesn't make much of a difference, they're replaced by someone with a similar pedigree And the business continues to operate as usual, but in the case of kramer, this was different.

One of the main reasons that anyone read the street dot com or subscribe to action alerts plus was to listen to kramer's insights about stocks, as he spent more and more of his time at cnbc and less of his time at the street. The street's value proposition declined substantially. This phenomenon is called key man risk when the future prospects of the business depend heavily on one person in 2019, the street voluntarily delicious itself from the nasdaq and was acquired by another digital media company called the maven for 16.5 million dollars. That's less than one percent of the company's peak valuation of 1.7 billion dollars kramer said that he would continue to work at the street and run the action alerts plus club.

The idea was that maven could integrate the street with their mobile-friendly digital platforms, to increase the value proposition to consumers. Unfortunately, these synergies didn't play out as well as expected in september of 2021. Kramer, cut ties with the street and will no longer be running. The action alerts plus offering instead he'll be moving exclusively to cnbc and running the new cnbc investing club.

That club is a paid subscription which provides alerts and analysis on kramer's traits in his charitable trust, similar to the action alerts. Club, tens of millions of people watch cnbc on cable tv every month and over 85 million people visit the cnbc website or other digital properties. The ability of them to promote kramer's investing club is far greater than the street.com could ever hope, for they also have more resources for film crews to make exclusive broadcasts with kramer. This means tens of millions of people are scrolling through cnbc on a monthly basis and can see investing club exclusive headlines.

We don't know exactly how much of the investing club revenue goes to kramer and how much goes to cnbc, but it's likely that he's making way more than he ever made on the street. Cnbc has 85 million monthly visitors if just one percent of them sign up for the investing club. That would give them 850. 000 members.

The annual subscription cost is 300 per year, which would give them 255 million dollars of revenue. They have some operational costs and cnbc will take a large cut, but it's reasonable to assume that kramer will get at least 25 of the profits. Seeing as he's the star of the show that would give kramer an annual income of 63 million dollars from the club or almost quadruple the entire valueofthestreet.com, if our estimates are correct, kramer could be making more than double the salary of jp morgan. Ceo jamie dimon, who is one of the highest paid ceos in america, kramer, probably ran these numbers himself.

It was a no-brainer to ditch his old company in favor of this new opportunity. At the end of the day, the street simply didn't have the scale to compete with cnbc. They couldn't write as many articles and didn't have as many high-profile interviews. Their biggest asset was jim cramer, but now even he is gone ever since kramer's departure viewership on the streets youtube channel has been declining rapidly.

They now get about 17 000 views per week. Cnbc's youtube channel gets about 5 million views per week or roughly 300 times more. The rise and downfall of the street.com shows that having one superstar isn't enough to build an entire media business, even if that superstar is jim cramer as soon as they decide to leave the company, there's nothing left to support their growth, alright, guys that wraps it up. For this video, what do you think about thestreet.com? Do you think there's any chance they can survive now that jim cramer is gone? Let us know in the comments section below, as always.

Thank you so much for watching and we'll see in the next one wall. Street millennial signing out.