Activist Cannell Ramps Up Pressure on Jim Cramer's TheStreet

May 21 2015 | 1:02pm ET

Activist J. Carlo Cannell has ramped up the pressure on Jim Cramer’s TheStreet (TST) to overhaul its board of directors, including a letter to the company’s shareholders in a recent securities filing.

Cannell, who has proxy control over more than three million shares of TST stock through his Cannell Capital and other affiliates, has been a shareholder in the company since 2011. In aggregate, he controls approximately 8.9% of the company, and has been vocal in his opinion that TheStreet is both undervalued and poorly served by its current board. 

Cannell initially amended his filing position in TST in a 13D filing with the SEC on December 14, 2014, and began discussions with the company about his concerns. Those conversations proceeded fairly well until late April, according to the letter, when the company rejected seven out of the eight board candidates Cannel had recommended. The eight, although initially approved by TST, was reportedly also rejected a few weeks later. 

Instead, the company then nominated incumbents Mark Walsh and Jim Cramer. The move prompted Cannell to take his concerns to shareholders via an amended 13D filing, noting that it would vote against the election of the nominees as well as other proxy proposals, including approval of TST's executive compensation. 

“It is the opinion of Cannell Capital that the value of TST exceeds its current market appraisal,” the letter writes. “Cannell Capital further believes that this gap would contract favorably after the election of some new and truly independent members of the board of directors.”

Cramer, who was a co-founder of TST in 1996, has been the target of Cannell’s sometimes colorful concerns in the past about his generous compensation from TST and whether his external business commitments were detracting from efforts to revive TST's fortunes.

Cramer, who is a director, shareholder and employee of TST, is simultaneously host of the popular “Mad Money” show on CNBC. In late 2014, he entered into a lucrative contract with TheStreet in which he is guaranteed at least $2.5 million in royalties, $300,000 in licensing fees and various stock awards. 

On May 8, TST reported a net loss of $1.07 million for the first quarter of 2015. 

“It is the experience and belief of Cannell Capital that good management and directors don’t spend lavishly to protect their own positions, jobs and perks,” writes Cannell in the letter. “A good board is objective. A good board puts all shareholders before the interest of members of the board or management.”

The letter goes on to promise further communication. “In subsequent releases, Cannell Capital will outline more reasons why it thinks that interests of the Board of Directors of your company, TheStreet, are not fully aligned with your interests and those of most other shareholders.”

TheStreet’s 2015 annual meeting will take place on June 11. The company has engaged in a series of acquisitions over the past two years to help boost its bottom line and diversify from products that target primarily retail investors. 

Cannell is the second-largest outside shareholder of the company after Technology Crossover Ventures, which owns 10.4%, and is followed by Harvey Partners, at 7.2% and Jeffrey Moskowitz’s Harvey Partners, at 6.7%, according to the company’s proxy statement. 

Jim Cramer, meanwhile, owns 6%.

San Francisco-based Cannell Capital was founded in 1992 by Cannell with $600,000. It has reportedly grown to $890 million in AUM. 

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