Recently, the rap artist known as “50 Cent” was fortunate to have a massive return on a stock. He ended up making close to $8.7 million in a single day; not too shabby for anyone. The matter in which he made this significant gain was the very definition of questionable however and he might have some questions to answer in the near future.
The story itself is that 50 Cent, aka Curtis Jackson, was using his Twitter account recently to suggest to others that they should get onboard with an investment that he is currently in. H&H Imports would otherwise be considered an insignificant penny stock on a list of hundreds if not thousands of other penny stocks. That isn’t to say anything bad about H&H (except for the fact that the company has lost money for the past two years, and for the last four quarters. Same goes for OCF, plus they have negative shareholder equity; but I am sure 50 cent did a detailed analysis of the company and expects earnings and CF to improve), but it was simply an unheard of and meaningless stock which was actually losing money and would be considered a risky investment at best.
“You can double your money right now. Just get what you can afford,” was one of the major tweets about the company that gained 290% in approximately 24 hours. This caused many to start to question why this really was happening. Obviously you cannot prove anything because this is a grey area, but one of the first thoughts on the minds of many were whether 50 Cent was actually trying to give out unsolicited investment advice, or whether he had ulterior motives.
“They are no joke get in now,” was another of the tweets that 50 cent had stated to his followers, and apparently they were listening. Almost four million strong took the advice (or at least enough to make a significant change in the market and in 50 cent’s pocketbook as well.
50 Cent was the beneficiary of almost 30 million shares of the stock itself back in October, when he more or less joined / became partners with Kevin Harrington’s TV goods and marketing firm. It was an odd match to say the least, but stranger partnerships have occurred in the business world. What is even more impressive in the deal is that 50 Cent also received warrants with the stock so that he could cash out if they stock hit certain numbers, the lowest of which is 15 cents per share, the stock is currently trading at $0.99. This is not to say that penny stocks don’t hit that amount, but in an investment that is highly volatile to begin with, an influx of buyers could suddenly change the price substantially … especially if those buyers are novices to the field of penny stocks.
“Ok ok ok my friends just told me stop tweeting about HNHI so we can get all the money. Hahaha check it out its the real deal,” read another of the major tweets that 50 Cent had listed. Imagine if (for whatever reason) someone who is just starting out with investments decides to take a chance on penny stocks? At the start of the day the stock was only trading at $.10 per share, so clearly even a novice investor could come away with one hundred shares of a real company, for only $10.00!
Now when you think about the inexperienced investor, you should instantly be able to understand why they are so vulnerable. People who spend a great deal of time learning about investment strategy are already susceptible when it comes to receiving poor advice. Even the self-proclaimed guru’s on Wall Street give out awful financial advice. However, when you have someone making what amounts to be an impulse buy for stocks based only on a celebrity telling people that it is a way to get rich quick then it becomes questionable. Combine that with the idea that it’s only a penny stock, and even the poorest of investors can be drawn in.
This shouldn’t be seen as an issue simply because it was used for penny stocks. This is an issue because it becomes quite questionable in terms of investment ethics. The stock jumped from 10 cents to 39 cents per share in the day, and as the owner of 30 million shares, 50 Cent was clearly able to benefit. The problem becomes where 50 Cent’s official position is. At the time of the incident he owned almost 13% of the company, so it could be said that he had some other motives at hand. The question will be whether or not he has an official role with the company, and that is when he could start to hear some questions from the SEC.