Made for Each Other: Wall Street Sleaze and Anthony Robbins
Didn't you just know it ... that given enough time and a high enough average for the Dow industrials, the day would sooner or later come when, like two jilted lovers on a late-night prowl for satisfaction in all the wrong places, Anthony Robbins and the Wall Street dot-com crowd would eventually find each other?
You know Mr. Robbins. He's the self-proclaimed reigning titan of motivational teaching who claims to have put the get-up-and-go in the lives of big shots ranging from Bill Clinton to almost anyone else you can think of.
That's what I need in my life: more get-up-and-go. I, of course, only know Robbins from his cable TV infomercials, which ran for years on the tube, then dropped off and now abruptly are back again. But you only have to see them once to know that Robbins has so much get-up-and-go charisma, it's not funny. Check out those chisel-chinned features, the blinding smile, the Billy Graham hand gestures. Robbins is the man that Stone Phillips would be if he could get unstuck from that five-nights-a-week Dateline meat grinder and spend some time practicing his smile.
My own personal favorite scene from Robbins' infomercials features Tony -- all 6 feet 7 inches of him -- lounging within the enveloping folds of what looks to be a $4,000 custom-tailored Brioni suit while declaiming to Leeza Gibbons (the obligatory adoring blonde) as to how, upon discovering that poverty is not all it's cracked up to be, young Master Robbins said to hell with this and went out and got himself rich by "awakening the giant within" ... the result of which he now owns an island resort somewhere in the Pacific.That's what I want: my own island resort in the Pacific. I want to be like Robbins, lounging on the veranda of my Moorish castle overlooking the azure Pacific, with my own palm trees swaying gracefully in the distance, to the caress of my own trade winds that are wafting luxuriously across the undulating green hills of My Own Island Resort. Oh, yes. That, at least, is what I wanted until that Tae Bo guy came along and filled my head with a whole new set of cable TV infomercial fantasies. Now I want to be like him instead: King Tae Bo, all rippling with muscles, shadow-boxing to rock music in front of 300 sweating blond women adoringly undressing me with their eyes while thinking, King Tae Bo, what a hunk! Oh, yes. Meanwhile, it would appear that Robbins has caught the eye of the Wall Street IPO tease machine (or vice versa) and has now embarked upon turning his motivational message into investible common stock. Apparently Wall Street, or Robbins, or both, think that common stock in Robbins is what I'll be wanting next. To which I now respond, upon examination of the relevant documents that have lately been filed with the Securities and Exchange Commission in the matter: Not on your life, guys. I'd rather be beaten senseless by King Tae Bo. The transaction in question, put together by some clever fellows at the Allen & Company investment banking house, features a cheeseball maneuver that will be instantly familiar to Eye to the Keyhole regulars: the so-called reverse merger into a shell. This is a time-tested ploy used by companies that want to sell stock on Wall Street but, for one reason or another, don't want to go through all the annoying folderol of telling investors exactly what the company's financial situation really is. To avoid doing so, the privately held company in question simply buys a defunct penny stock shell company and thereby acquires all its existing stockholders and their worthless stock in the process -- in effect, going public on the cheap in what amounts to a stealth IPO. For example, a now-defunct penny stock company might have started out in the precious metals boom of the late 1970s as a $10-per-share Nevada silver mine. A few years later and we might find the company bankrupted, a casualty of the collapse in commodities prices in the early 1980s, leaving the shareholders stuck with stock worth a penny or two per share. Then, in the fullness of time, a privately held Internet company might come along and, seeking quick access to Wall Street without having to go through an actual IPO, simply buy the defunct silver mine company for a few thousand dollars, stick a dot-com in the name and instantly capitalize on Internet fever. That is the scenario that the Allen & Company crowd have now set up for Robbins -- the only difference being that instead of a busted silver mine, the Allen boys are using a health-tech company known as GHS as the shell in this game of Wall Street switcheroo. Why GHS? No mystery there. Allen has been a major sugar daddy for GHS since as far back as at least 1993, and as of February 1996 (and probably much earlier even than that), the firm has held at least 2 million shares of stock in the company at a cost that does not appear to have been much more than $1 per share. With GHS now selling, in the wake of the news of the deal with Robbins, for more than $13, the Allen stake has literally exploded in value. Getting GHS all prepped up as a totally, completely, 100% worthless piece of garbage so that Tony could acquire it for free, wasn't easy. That's because, while GHS was essentially worthless, it wasn't totally and completely worthless, having been involved for much of the 1990s in trying to make some money out of something known as a gamma knife -- basically a kind of radiation machine for cancer surgery. The business had never developed into the barn-burning operation that Allen had apparently hoped it would when it first got involved back in 1993, but it did provide a living of sorts for a couple of dozen people in a rented office down in Rockville, Md. As of March 31, the GHS balance sheet thus showed $2.6 million of cash, $3.9 million of equity and about $2.3 million in annual revenue. The question was how to get rid of all that without literally throwing it out the window. Here's the ingenious answer the gang came up with: Simply "give" it to GHS' current shareholders as a stock dividend, thereby creating a whole new company to be known as USN, while leaving behind a completely hollowed out -- yet publicly traded -- shell company in the form of GHS. Now, if I were an existing shareholder of GHS, I'd be pretty put out by that ploy since I would already own the gamma knife business, anyway. Yet by having it rammed down my throat as a stock dividend, I would now have to pay taxes on it as ordinary income, but we won't go into any of that. What matters is that into the emptied-out vessel known as GHS, Robbins has now folded his business -- or at least what looks to be certain basically worthless parts of it ... namely, a hastily concocted Internet operation going by the name Changeyourlife.com. That operation (we'll just call it CYL for simplicity's sake) is supposedly in the business of developing a Web site for "personal and professional improvement." But what's CYL worth -- I mean, really worth? Well, if you read the 10-Q that was filed in connection with the transaction on Aug. 16, it ain't worth zeroski. Says the filing, which presents the merged companies' combined balance sheets and other financial data, "there was no book value for [CYL's] assets in the contributing companies' books and records. CYL did not conduct operations prior to the acquisition." Oh, really? So, what, then, did Robbins get in return for this no-book-value, CYL operation that had never done a lick of dot-com anything before he invented it to take over GHS? Why, Tony got back 18.9 million shares representing 57.1% of the company -- shares that are, as of this writing, worth more or less $13 each. In other words, by doing nothing whatsoever except linking his name to a dot-com Web site that didn't exist, Robbins almost instantly made himself nearly $246 million richer. I guess that's what awakening the giant within is all about -- why it is that some folks can lounge around and look relaxed on their own Pacific resorts while others get no closer than the sucker's side of their TV screens at three in the morning. Some additional chum has been tossed in the water in the hope of getting a feeding frenzy going in the stock. That has come in the form of a side deal in which the Learning Annex (that's the outfit that offers $100-a-class courses on topics like how to pick up girls at the fragrance counter at Saks) has agreed to throw in its own Web site (www.brainfuel.com) in return for yet more stock in the company. But will GHS ever pay off for anyone except Toothy Tony? Some people who are plenty rich already seem to hope so. The company's latest financial filings show that, in connection with the merger, the company issued a "private placement" for a tranche of convertible preferred stock (the so-called Series B shares) that raised $15.1 million in what appears to be start-up money to help the Web site get going. Be that as it may, developing a Web site up to Tony's exacting standards is apparently no easy task. After all, the whole elaborate paper-shuffling fandango took place in May, and it's now late August, which is to say three months later, and if you were to log on to the Internet and try to call up the CYL Web site, what you would get are three pages of "stay tuned"-type text promising some sort of blow-your-mind Web site on how to improve your life -- if they ever get the site finished. Meanwhile, the www.brainfuel.com Web site is even cheesier ... a work-in-progress site that doesn't even identify who owns it. But Tony's no dummy. His own Web site (www.anthonyrobbins.com), which isn't part of the GHS deal and which he continues to own independently, remains as busy as ever, flogging his tapes, his books, his seminars and whatnot to any and all comers. Maybe he'll soon be offering motivational materials on how to get rich on Wall Street by doing virtually nothing at all. Oh, yes. You can reach me by email at email@example.com.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV