You probably knew that already; we certainly did down here in MA. But in case you were uncertain, today’s Globe supplies another piece of pretty solid evidence to that effect. Last summer, Scott Brown joined the “advisory board” of a Florida company hilariously called “Global Digital Solutions” that supposedly is in the business of “technology-
Global Digital Solutions Inc. does not yet sell or make guns. It has no revenue, no patents, no trademarks, no manufacturing facilities, and no experience developing weapons, according to its most recent corporate filings.
It was founded as a beauty supply company in New Jersey — selling hair spray, conditioners, and shampoos, before reinventing itself as a wireless data firm from California and then again last year as a South Florida-based firearms maker and gun technology innovator.
It is the kind of company, with scant assets and a shifting business model, that some financial professionals warn investors to steer away from.
The company, instead of selling firearms, has churned out press releases to attract small investors, including the one about Brown joining the firm, and issued millions of shares of stock to fund its operations. Shares closed at 46 cents on the OTCQB Marketplace on Friday…. Accountants said in interviews that Global Digital’s filings raise a number of warning signs for investors, including its varying business model and lack of actual products. The firm reported it has four employees, $271,776 in cash and had $19.7 million in losses as of March 31.
Brown, in exchange for joining this advisory board, received 1.5 million shares of stock. The Globe reports that the stock’s market value was about $1.3 million at the time, and is now about $690,000, as the stock’s value has declined substantially over the last several months. Once the shares vest (apparently by September 2014, though the exact date is unclear), Brown can sell them.
As an example of how Global Digital operates, check out this press release, from March of this year, announcing Global Digital Solution’s supposed intent to acquire Remington (one of the world’s largest firearms manufacturers) for about a billion dollars (Global Digital’s on-paper stock value is about $45 million). Per the Globe, the announcement “was greeted with derision by Remington and others in the industry, who dismissed it…. Industry analyst Andrea James issued a note to investors at the time calling it an ‘unrealistic bid’ that ‘probably won’t be taken seriously.'” Needless to say, the transaction has not moved forward.
This is a great deal for Brown. He gets a pile of stock that he can soon sell for a good amount of money. He apparently doesn’t actually have to do anything (the Globe reports that the advisory board has never met and has no scheduled meetings). And when questions are raised, he can say things like this (quoting the Globe story):
“GDSI is a start-up company that does not have significant operations at this point,” his communications director Elizabeth Guyton said in an e-mail. “Scott Brown has an advisory role but he is not involved in the day to day management or decisions of the company.”
In other words, “not my fault” – Brown’s usual response to everything. What a joke. So heads up, New Hampshire: if you elect this guy, the joke will be on you.
Global Digital announces an intent to acquire a company for $1 billion when it’s on-paper stock value is about $45 million. Sounds a bit like a Bernie Madoff-style Ponzi move.
It’s perfectly legal, though not likely to happen in this case.
In a leveraged buy-out, the bulk of the costs of the acquisition are borrowed from the target. After it succeeds, the merged entity then repays the notes (plus service charges, of course).
A company that allows itself to accumulate large amounts of cash is particularly vulnerable, since the cash-on-hand doesn’t generally translate to an increase market capitalization (the total market value of all the company’s outstanding stock). A shark can thus do a leveraged buy-out, gain access to the cash, then use the cash to clear the incurred debt. The acquirer then bleeds the cash and sells the remnants of the merged company.
For examples, see Bain Capital.
Sure, there are examples a a David shallowing a Goliath by borrowing a boat load of money and buying it. But even in the wild, wild west of today’s Wall Street, I hope the SEC has rules against issuing a press release that has no basis in reality and can only have one intention…to artificially pump up the stock value of a penny stock, so current stock holders can dump it for a big profit. Pump and Dump is still illegal.
Why should a company hire someone to manufacture an actual product, when the company can make money from nothing and produce nothing for it, except for the stock bonuses to pay off friends like Scott Brown? It still seems to me that this is not that different from what Bernie Madoff did, and he’s in jail for life. The only difference is Madoff falsified some records along the way. If he’d been “honest” and admitted from the start that it was all a Ponzi scheme, he’d still be in business today.
One that exists to fish for investor money, but isn’t actually a business outside of that. There are some surprisingly long-lived vaporware companies around.
Other less-courteous nouns come to mind for me.
was setting the sleaze bar pretty high with his commercials for American Advisors Group’s “absolutely free” reverse mortgages. How many companies get cease and desist orders from the state’s Division of Banks (for deceptively marketing reverse mortgages as “government benefits”).
But former Senator Scott Brown has him beat. Guy is such a competitor.
I wonder if he’s been involved in other shady deals.
In 2012, I referred to then Sen. Scott Brown’s reelection campaign as the “Seinfeld” campaign because it was a campaign about nothing (apologies to Jerry Seinfeld). Now it appears Scottie is continuing his losing streak with a “Seinfeld” Corporation, i.e., a corporation about nothing. Presumably, the good folks in NH will see through his scam as we did a coupla years ago.
This sleazy company is engaged in illegal “pump and dump” stock schemes designed to bilk investors out of their money. It reminds of Scotty B. Massachusetts investors bought the crappy Scotty Brown stock which briefly looked like a good buy. Of course, it turned out to be too good to be true. At least the voters ended up with a blue chip growth stock–ELIZABETH WARREN!
I was recently told that Scott Brown forfeited his stocks when he quit the board, can anyone verify or deny this with a supporting reference?
A NH based cousin came up with it at my family BBQ in Wakefield this weekend “Shaheen knows New Hampshire”.
A relative who lives in Merrimack but shops and works in NH came up with that one during a conversation about the race, “I voted for Brown down here, but Shaheen knows New Hampshire and he doesn’t, I think he’s screwed”. So do I.