Last week, TheStreet.com (NSDQ: TSCM) announced that it had sold a minority stake in itself to PE/VC firm TCV for $55 million. In an 8-K filed with the SEC today, the company clarified what TCV got for its investment. In addition to the 1.1 million warrants exercisable at $15.69/share over the next five years (as stated in the initial release), the firm got Series B shares that convert to 3.85 million common shares at a price of $14.26. Based on the company’s most recent share count of 29.54 million, this stake comes to 13 percent. Also, at $14.26, the 3.85 mill shares come right to $55 million, the size of the investment.
So the 1.1 million warrants are pure sweetener. TCV spent $55 million on $55 million worth of stock, but if the stock rises past $15.69 at some point in the next five years, the firm captures the difference.
Just as a quick example of how it works, suppose TSCM shares rose to $20. TCV would make $5.74 ($20-$14.26) each on 3.85 million shares, for $22 million. It would then make an additional $4.7 million on the warrants (1.1 million*($20-$15.69)), for a total profit of $26.7 million