Grand Theft Auto on TheStreet.com

"TheStreet.com (Nasdaq: TSCM) Reports Record Fourth-Quarter and Full-Year 2007 Financial Results" blared yesterday's headline. Yeah, OK, I guess that's one way to look at it. But judging from the 14% sell-off that has ensued, investors were looking at things a bit differently.

• Q4 revenue grew 38% to $19.9 million, a bit shy of the expected $20 million.
• Profits, in contrast, grew just half as fast -- although at 19% growth and $0.16 per share GAAP, they at least met some expectations for the quarter.  

Or did they?
What you see above were indeed the "headline" numbers -- the ones TheStreet.com put front and center in the first couple of paragraphs of its earnings release. Only upon reading deeper into the news did investors learn that the recent sale of a slug of preferred stock to private equity firm Technology Crossover Ventures resulted in all other shareholders being treated as, well, somewhat less than preferred. Part of the deal with TCV, it now becomes clear, was the immediate payment of a special "deemed" dividend to the newcomer -- which cost existing shareholders $0.07 per share. Result: a 36% decline in "net income attributable to common stockholders."

Oops
Oops, indeed. The bad news continues:

• Despite rising in Q4, free cash flow for the year as a whole dropped to $8.5 million, down 38% versus fiscal 2006
• TheStreet is becoming more and more dependent on an advertising market so bad that it apparently scared News Corp (NYSE: NWS) out of its announced intention to make WSJ.com free for all; spooked Google (Nasdaq: GOOG) investors a few weeks ago; and can probably be blamed for canceled display ads -- and a bad earnings miss -- at Bankrate (Nasdaq: RATE).
• Meanwhile, the more dependable, predictable revenue stream afforded by TheStreet's subscription-based products continues to stagnate. Revenue here grew just 2% for the year, and actually declined 4% in Q4. (Contrast that with the 9% growth in premium subscriptions that Morningstar (Nasdaq: MORN) just reported, and you'll see why I think Morningstar is being Foolish -- with a capital "F" -- in hewing more to a subscription-based business model.)

Adding insecurity to injury
To top it all off, investors must now worry that TheStreet will lose its marquee draw in the form of "co-founder, director and columnist, James J. Cramer." Twice now, the goateed one has stalled on extending his long-term employment contract, for reasons unknown.

Personally, I think this last worry is a red herring. But investors beware: Just the threat of Cramer walking out on TheStreet could move money (and stock options) from your pockets to his.

For more news on TheStreet.com, read:

• TheStreet.com Suggests a Detour
• A Big Booyah! From AOL
• TheStreet.com Gets Juiced
• Fender Benders on TheStreet.com