Financial ratings is big business. And TheStreet.com sees the dollar signs. After reporting it announced an impressive third-quarter on Thursday, Oct. 26, the New York-based online financial news content provider stressed that its purchase of Weiss Ratings in August made a contribution and will be a bigger part of its earnings in the near future. TheStreet.com did not clarify how much the Weiss acquisition added to its net income, which rose 93% over the same period a year ago, to $3.1 million, or 11 cents a share, compared to $1.6 million, or 6 cents, in the same year ago period.
"With the acquisition of Weiss Ratings, which we have re-branded as TheStreet.com Ratings, we were able to significantly broaden our content inventory and audience reach, further positioning ourselves to meet increasing advertiser demand. In addition, we believe this acquisition will drive traffic to our free offerings and help further meet our objective of making advertising a larger portion of our overall revenue mix," Thomas J. Clarke Jr., chairman and chief executive officer of TheStreet.com, said in a statement. Hmm, sounds like positive public relations talk, but Clarke is taking his company in the right direction with the Weiss deal.
TheStreet.com provides in-depth commentary and market analysis in a crowded field with the likes of CNBC, MarketWatch, the Motley Fool, Business Week and the Wall Street Journal. But most of TheStreet.com's so-called competitors do not have their own ratings except for Business Week in an indirect way, because the magazine is part of the McGraw-Hill publishing empire, which also includes Standard & Poor's.
Right now, TheStreet.com has stock ratings on more than 6,000 companies it covers, so the potential for contributing a bigger part to earnings is strong. In the future, it can create a subscriber-only database to see the history of a company's ratings and charge a company a fee to rate the debt of the company like other established rating agencies such as Standard & Poor's, Moody's Corp. and Fitch Ratings. Over the long run, the potential for TheStreet's ratings division is great and could prove to be a gold mine considering the success of the aformentioned rivals. For example, Moody's reported Oct. 25 that ratings revenue alone totaled $394.0 million in the third quarter, rising 19% from a year ago. That figure is a sizable portion of the company's total third-quarter revenue of $459.6 million.
In addition, with established rating agencies missing the implosion of big companies such as Enron, investors — especially institutional investors — most likely will be seeking a dependable independent arbiter of a company's health. And that's what theTheStreet.com is betting on. — Gerald Magpily
See TheStreet.com article
See Houston Chronicle article
See earlier post about this deal
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