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When NXT Nutritionals (NXTH.OB) recently announced that basketball legend Shaquille “Shaq” O’Neal had agreed to endorse the company’s sweetener, investors rushed to celebrate their good fortune. That blessing could turn into a curse, however, if history serves as any guide.
After all, celebrity athletes have inked similar deals with other penny-stock companies that later turned out to be suspected scams. Moreover, years ago, Shaq himself publicly endorsed a Washington company that orchestrated one of the largest investment frauds in that state’s history.
For its part, NXTH says that Shaq has agreed to promote the company’s SUSTA low-calorie sweetener because of the product’s “great taste” and “health benefits.” But Shaq clearly expects a generous payout in return.
According to a deal struck in late November, Shaq has already received 1 million shares of NXTH stock – and has been promised 2 million more – for lending his name to the company. With NXTH trading at $1.40 a share, that deal is currently worth $4.2 million.
Shaq can begin selling his NXTH stock, shedding up to 100,000 shares a month, on the first day of February. If the stock falls sharply after that time, he can suspend – or even terminate -- the deal.
The Street Sweeper attempted to reach Mine O’Mine, the firm that inked the deal on Shaq’s behalf, but those efforts proved unsuccessful. An NXTH representative, contacted about the deal last month, failed to arrange an interview with Shaq or his firm as well.
NXTH’s stock actually peaked before Shaq came through with his endorsement. It topped out at $3.47 on Oct. 27, following bullish recommendations from several promoters who were paid to tout the shares. It had fallen below $2 a share, however, by the time NXTH landed Shaq as a company spokesman. Although the stock jumped past $2.50 a share following news of that endorsement, it has lost all of that ground – and then some – since that time.
Drinking the Kool-Aid
The same pattern showed up in another penny stock following a similar celebrity endorsement.
Last month, shares of Blue Gem Enterprises (BGEM.OB) were literally stuck at 18 cents – on no trading volume at all – days before the company announced that star football receiver Terrell Owens (T.O.) had agreed to promote a sports drink that it distributes. During the first trading session following news of that deal, BGEM shot up – on explosive volume of 13.3 million shares – to end the day with a remarkable 85% gain.
BGEM maintained that heavy volume, but only half of those gains, when a promoter touted the stock (in exchange for 1.5 million free trading shares) the following day. After peaking at 76 cents during that session, BGEM ended the day at 51 cents a share. Although the stock continues to trade at a fairly brisk pace, it now fetches just 28 cents a share following a recent dive in its price.
Another beverage company endorsed by celebrity athletes has suffered an even worse fate. In early 2008, just a few months after launching a new health drink, the Purple Beverage Company (PPBV) began inking deals with professional baseball players to promote its product. By March of that year, the company’s stock had racked up such incredible gains that it caught the attention of Forbes despite its penny-stock status.
After rocketing 49,000% to almost $3 a share in just five short months, Forbes noted at the time, PPBV boasted a $152 million market value that was 105 times greater than the actual book value of the company.
Over the course of the next several months, PPBV continued to add some big names – including legendary Yankees relief pitcher Mariano Rivera – to its team. But the company’s winning streak had ended by early 2009, when Forbes revisited the stock and found it trading for just one penny a share. PPBV’s founding CEO, Ted Farnsworth, has departed from the company since that time.
“After going through a very difficult time over the last several months, we are now reenergized,” Farnsworth proclaimed on his way out the door. “This (management change) is a positive move for the company, the brand and the shareholders.”
Eight months later, PPBV trades on the lowly Pink Sheets for a fraction of a penny a share.
Promoting a Loser
Meanwhile, a company once endorsed by Shaq has already left a dark smudge on the basketball player’s name.
Back in 2001, news reports show, Shaq emerged as a prominent spokesman for a Seattle-area fitness company known as Znetix. The basketball star even sported a Znetix hat after his team won the national championship in June of that year, past news reports note, even as state regulators began cracking down on Znetix founder Kevin Lawrence for violating securities laws.
Seven months after that game, the Associated Press reported, the Securities and Exchange Commission formally filed charges against Znetix and Lawrence for bilking thousands of investors out of $80 million (a sum that would approach $100 million in the end). One year later, the Seattle Post-Intelligencer noted, the receiver overseeing Znetix’s assets filed a lawsuit against several big-name professional athletes – including Kareem Abdul-Jabbar and Eric Dickerson – who were identified as negligent officers or directors of the defunct company.
“They continued to serve and accept compensation from Znetix,” the lawsuit covered in the Post-Intelligencer article stated, “all the while burying their heads in the sand and ignoring flagrant wrongful acts going on around them.”
Although Shaq was not among the athletes sued, his name would remain attached to the scandal for years. It popped up in early 2005, for example, as three Znetix stock salesmen headed off to jail for their role in the massive scam. By then, the Post-Intelligencer reported, Lawrence himself had already received a 20-year prison sentence – setting a record in the state of Washington – after pleading guilty to securities fraud charges for masterminding the huge white-collar crime.
The media was still highlighting Znetix, along with the company’s star-studded publicity campaign, as a cautionary tale for investors just a few short years ago.
“Znetix recruited sports stars – including Shaquille O’Neal and Tiger Woods – for endorsement deals, and promised fabulous returns for investors,” The Columbian, a Washington-based newspaper, reminded in mid-2007. But “as the U.S. attorney’s office in Seattle succinctly put it in March 2005, ‘The advertising campaign was designed only to sell more stock, as Znetix had no products or services to offer, and little or no revenue.’”
Lately, stock promoters have been using Shaq’s recent endorsement of NXTH as a new reason to tout the company’s shares. Right now, for example, HealthyStockProfits.com features a picture of Shaq – along with news of his endorsement – on the front page of a long and bullish report urging investors to buy NXTH shares.
With Shaq now serving as an official spokesman for the company, the report states, NXTH is poised to capture a huge share of the multibillion-dollar sweetener market and see its stock skyrocket as a result. NXTH could soar more than 500% over the next nine months, the report proclaims, so investors should buy the stock now while the price is still “dirt cheap.”
Meanwhile, “in a rare happenstance,” the report notes, several other stock pickers – including Charles Payne of Fox Business Network – have embraced NXTH as well. In yet another “coincidence,” however, the report later discloses in a buried disclaimer that it received payment from the same obscure media firm that financed Payne’s bullish report on the company. Moreover, the report admits, that media firm received money for its payment from an NXTH shareholder “who may or will sell shares of the feature company at or about the time of this report.”
All the while, the report keeps urging investors to do just the opposite.
“Make no mistake: NXTH Nutritionals is still flying under the radar,” the report states. “And as soon as word hits the Street, I predict this stock will go through the roof.
“Invest now,” it proclaims, “before this stock zooms into the stratosphere.”
* To contact Melissa Davis, the author of this story, please send an email to editor@thestreetsweeper.org.
When NXT Nutritionals (NXTH.OB) recently announced that basketball legend Shaquille “Shaq” O’Neal had agreed to endorse the company’s sweetener, investors rushed to celebrate their good fortune. That blessing could turn into a curse, however, if history serves as any guide.
After all, celebrity athletes have inked similar deals with other penny-stock companies that later turned out to be suspected scams. Moreover, years ago, Shaq himself publicly endorsed a Washington company that orchestrated one of the largest investment frauds in that state’s history.
For its part, NXTH says that Shaq has agreed to promote the company’s SUSTA low-calorie sweetener because of the product’s “great taste” and “health benefits.” But Shaq clearly expects a generous payout in return.
According to a deal struck in late November, Shaq has already received 1 million shares of NXTH stock – and has been promised 2 million more – for lending his name to the company. With NXTH trading at $1.40 a share, that deal is currently worth $4.2 million.
Shaq can begin selling his NXTH stock, shedding up to 100,000 shares a month, on the first day of February. If the stock falls sharply after that time, he can suspend – or even terminate -- the deal.
The Street Sweeper attempted to reach Mine O’Mine, the firm that inked the deal on Shaq’s behalf, but those efforts proved unsuccessful. An NXTH representative, contacted about the deal last month, failed to arrange an interview with Shaq or his firm as well.
NXTH’s stock actually peaked before Shaq came through with his endorsement. It topped out at $3.47 on Oct. 27, following bullish recommendations from several promoters who were paid to tout the shares. It had fallen below $2 a share, however, by the time NXTH landed Shaq as a company spokesman. Although the stock jumped past $2.50 a share following news of that endorsement, it has lost all of that ground – and then some – since that time.
Drinking the Kool-Aid
The same pattern showed up in another penny stock following a similar celebrity endorsement.
Last month, shares of Blue Gem Enterprises (BGEM.OB) were literally stuck at 18 cents – on no trading volume at all – days before the company announced that star football receiver Terrell Owens (T.O.) had agreed to promote a sports drink that it distributes. During the first trading session following news of that deal, BGEM shot up – on explosive volume of 13.3 million shares – to end the day with a remarkable 85% gain.
BGEM maintained that heavy volume, but only half of those gains, when a promoter touted the stock (in exchange for 1.5 million free trading shares) the following day. After peaking at 76 cents during that session, BGEM ended the day at 51 cents a share. Although the stock continues to trade at a fairly brisk pace, it now fetches just 28 cents a share following a recent dive in its price.
Another beverage company endorsed by celebrity athletes has suffered an even worse fate. In early 2008, just a few months after launching a new health drink, the Purple Beverage Company (PPBV) began inking deals with professional baseball players to promote its product. By March of that year, the company’s stock had racked up such incredible gains that it caught the attention of Forbes despite its penny-stock status.
After rocketing 49,000% to almost $3 a share in just five short months, Forbes noted at the time, PPBV boasted a $152 million market value that was 105 times greater than the actual book value of the company.
Over the course of the next several months, PPBV continued to add some big names – including legendary Yankees relief pitcher Mariano Rivera – to its team. But the company’s winning streak had ended by early 2009, when Forbes revisited the stock and found it trading for just one penny a share. PPBV’s founding CEO, Ted Farnsworth, has departed from the company since that time.
“After going through a very difficult time over the last several months, we are now reenergized,” Farnsworth proclaimed on his way out the door. “This (management change) is a positive move for the company, the brand and the shareholders.”
Eight months later, PPBV trades on the lowly Pink Sheets for a fraction of a penny a share.
Promoting a Loser
Meanwhile, a company once endorsed by Shaq has already left a dark smudge on the basketball player’s name.
Back in 2001, news reports show, Shaq emerged as a prominent spokesman for a Seattle-area fitness company known as Znetix. The basketball star even sported a Znetix hat after his team won the national championship in June of that year, past news reports note, even as state regulators began cracking down on Znetix founder Kevin Lawrence for violating securities laws.
Seven months after that game, the Associated Press reported, the Securities and Exchange Commission formally filed charges against Znetix and Lawrence for bilking thousands of investors out of $80 million (a sum that would approach $100 million in the end). One year later, the Seattle Post-Intelligencer noted, the receiver overseeing Znetix’s assets filed a lawsuit against several big-name professional athletes – including Kareem Abdul-Jabbar and Eric Dickerson – who were identified as negligent officers or directors of the defunct company.
“They continued to serve and accept compensation from Znetix,” the lawsuit covered in the Post-Intelligencer article stated, “all the while burying their heads in the sand and ignoring flagrant wrongful acts going on around them.”
Although Shaq was not among the athletes sued, his name would remain attached to the scandal for years. It popped up in early 2005, for example, as three Znetix stock salesmen headed off to jail for their role in the massive scam. By then, the Post-Intelligencer reported, Lawrence himself had already received a 20-year prison sentence – setting a record in the state of Washington – after pleading guilty to securities fraud charges for masterminding the huge white-collar crime.
The media was still highlighting Znetix, along with the company’s star-studded publicity campaign, as a cautionary tale for investors just a few short years ago.
“Znetix recruited sports stars – including Shaquille O’Neal and Tiger Woods – for endorsement deals, and promised fabulous returns for investors,” The Columbian, a Washington-based newspaper, reminded in mid-2007. But “as the U.S. attorney’s office in Seattle succinctly put it in March 2005, ‘The advertising campaign was designed only to sell more stock, as Znetix had no products or services to offer, and little or no revenue.’”
Lately, stock promoters have been using Shaq’s recent endorsement of NXTH as a new reason to tout the company’s shares. Right now, for example, HealthyStockProfits.com features a picture of Shaq – along with news of his endorsement – on the front page of a long and bullish report urging investors to buy NXTH shares.
With Shaq now serving as an official spokesman for the company, the report states, NXTH is poised to capture a huge share of the multibillion-dollar sweetener market and see its stock skyrocket as a result. NXTH could soar more than 500% over the next nine months, the report proclaims, so investors should buy the stock now while the price is still “dirt cheap.”
Meanwhile, “in a rare happenstance,” the report notes, several other stock pickers – including Charles Payne of Fox Business Network – have embraced NXTH as well. In yet another “coincidence,” however, the report later discloses in a buried disclaimer that it received payment from the same obscure media firm that financed Payne’s bullish report on the company. Moreover, the report admits, that media firm received money for its payment from an NXTH shareholder “who may or will sell shares of the feature company at or about the time of this report.”
All the while, the report keeps urging investors to do just the opposite.
“Make no mistake: NXTH Nutritionals is still flying under the radar,” the report states. “And as soon as word hits the Street, I predict this stock will go through the roof.
“Invest now,” it proclaims, “before this stock zooms into the stratosphere.”
* To contact Melissa Davis, the author of this story, please send an email to editor@thestreetsweeper.org.
