“Gangstas”, Goldman and Twitter

(11 am. – promoted by DDadmin)

Crossposted from The Stars Hollow Gazette

Which Is More “Gangsta,” 50 Cent’s Twitter Stock Pitch or Goldman’s Facebook Deal?

Music was Curtis “50 Cent” Jackson’s second career. News reports say he began dealing crack at the age of twelve, after the murder of his coke-dealer mother. Early tracks like “Ghetto Quran” and “How to Rob” reflect a brutal, street-hustling life, and Jackson has the bullet wounds to match. He’s talented, wildly successful, and I sure wouldn’t mess with him.

But when he starts mixing social media with pumped-up investment pitches, 50 Cent is moving into Goldman Sachs territory. “Fitty” reportedly earned millions for touting a stock on Twitter, without disclosing that he owned shares in the company. How does that stack up against Goldman’s own social media deal with Facebook? When you move into the stock market, you’re going where the real gangstas roll. . . . . .

“Ok ok ok my friends just told me stop tweeting about HNHI so that we can get all the money. Hahaha check it out its the real deal.”

50 Cent about a marginal stock all weekend and into early Monday, calling it “BIG MONEY” and saying “you can double your money right now.” The effect was mindblowing.

Jackson’s credited with moving the stock of a company called HNHI by $50 million dollars in one day, even though its own auditor reportedly “expressed concerns about its financial future.” Fitty didn’t mention that he held 30 million shares of the stock, which he picked up for $750,000 last fall. Yesterday’s surge reportedly netted him somewhere between $8.7 million and $10 million. No wonder so many news accounts repeated the name of his hit album, Get Rich or Die Tryin’.

HNHI increased in value by about 200%. Even after it dropped more than 23% today, Jackson was way ahead of the game. Fitty’s attorneys presumably got a little worried, because the disclaimers started appearing late Monday: “HNHI is the right investment for me it might not be for u! Do ur homework,” “I own HNHI stocks thoughts on it are my opinion. Talk to your financial advisor …”

From ProPublica:

Strip away the involvement of a celebrity and the use of social networking and this story bears some resemblance to one of the oldest stock market games around: The pump and dump.

In their classical form, such schemes work this way: Insiders talk up the attributes of a worthless stock (the pump) and then sell when its price jumps (the dump). So far, 50 Cent appears to have avoided violating laws against this sort of behavior because he has not sold H&H stock.

A spokesman for the rapper pointed out that the 7.5 million shares are restricted — meaning they can’t be sold until certain conditions are met. The warrants allow him to buy up to 22.5 million shares, which gives 50 Cent a powerful incentive to talk up the stock. They can only be profitable if the price of H&H rises above certain thresholds. He paid $750,000 for the shares and warrants.

“This kind of stuff has given the SEC headaches for a long time,” says Rick Sauer, a former Securities and Exchange Commission attorney who wrote a book about fighting stock fraud at the agency called “Selling America Short.” “It’s probably OK unless he knew the stock was bad and touted it anyway, which is hard to prove.” . . .

Carmen Electra, the Playboy model turned actress, has made a habit of pitching bulletin board stocks. A few months ago, the SEC sued the guy who played the blond partner of Erik Estrada in the 1970s cop-show ChiPs, charging him with securities fraud. Even Shaquille O’Neal, the NBA star with a massive Twitter following, has promoted a microcap stock that he owned, which subsequently plummeted.

And yes, it’s amazing that the penny stock market, a Petri dish of fraud, exists at all. It’s caveat emptor all the way.

But is what 50 Cent did really that different from what happens all day long on CNBC when professional money managers take to the airwaves to praise the stocks of companies they already own?

3 comments

    • TMC on January 14, 2011 at 4:43 am
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