Cramer or No Cramer, Stay Away from "Gentleman's Lounge" Rick's Cabaret (RICK)

I came across a very odd coincidence on Friday -- or at least, what I can only hope is a coincidence.

I was walking around town, listening to a podcast of Thursday's iteration of Cramer's radio show. He opened with a story about how traders at Wall Street firms are huge customers at strip clubs because that's how they woo their clients -- at least, in Cramer's mind, this is how the fims that don't have something solid to sell, like good research, sell their trading desk services.

Now of course, I wouldn't recognize a Wall Street trading desk salesman if he was wearing a name badge, and I've only been in a handful of strip clubs in my life, so I can't verify that part of the story.

But assuming it to be true, Cramer argued that this was a reason to buy Rick's Cabaret (Nasdaq: RICK), a tiny company that happens to be the only publicly traded topless bar stock (sorry, "gentleman's lounge stock") in the country.

Just in the interest of running through the logical argument, Rick's does have businesses in NYC, so there may be something there, though I don't know if they make more from that or from their "Hummers" sports bar or their websites for swingers (really).

A few minutes later in the day I found the second part of the coincidence while reading the Wall Street Journal -- yes, the old fashioned print edition (what can I say, I'm still attending a conference away from my office, I've got very little WiFi coverage for my Lifedrive, and I like readin' the old fashioned print newspaper). For the purposes of this story, which is probably of limited use anyway because I never intend to invest in Rick's Cabaret, it's actually a good thing that I was reading the print edition ... since I never would have sought out the electronic version of this article if my eye hadn't wandered across it on the bottom of page C3.

The article was titled "U.S. Files Penny-Stock Mob Case", with a byline by Chad Bray. I assume it's also in the online editon, but I haven't checked. I do know the news has now gotten a little attention.

What we learn from this article is that members of the Colombo and Luchese organized crime families have been charged with manipulating the penny stock market.

And this indictment, which I imagine was released not far apart from the time Cramer was mentioning Rick's Cabaret, specifically notes that RICK was one of more than a dozen stocks that were artificially manipluated for the profit of these crime families.

Now this may not have much bearing on Rick's Cabaret as a company -- I don't know that the company itself is suspected of being in any way complicit in this manipulation, but it would probably be relatively easy to manipulate the stock without any participation from Rick's since the market cap is under $30 million. And it's not like RICK is starting out the day with a lily white reputation.

What makes me especially nervous about the companies on the list, including RICK, is that the mobsters allegedly referred to many of these companies as "house stocks" -- if that means anything like what I think it means, and here I'm thinking of "house boy" or "house wine", it can't be good.

Unlike some of these companies, Rick's Cabaret at least does exist as an ongoing business and has posted a minimal profit in the past year, though I have no idea how their financials really look -- some of the other businesses in the article are alleged to be just fronts or shams, in my reading of the article.

I often hear people complaining on Yahoo Message Boards and elsewhere that stocks are being manipulated by market makers or others ... in almost every case, it sounds like sour grapes and it's almost impossible to believe the stories, especially for a company of any size at all.

But when you're talking about actual indictments, and about a company like Rick's in a seedy industry, and you're talking about the manipulation being done by crime families, it starts to sound much more realistic ... and much more like the kind of alleged manipulation you don't want to get anywhere near, Cramer or no Cramer.

And it makes you wonder -- are those guys who are entertaining their clients at Rick's Cabaret, according to Cramer, the same guys who are helping the Colombos and the Lucheses to manipulate the shares?

I don't blame Cramer, though I hope no one bought shares based on just his note that traders were sliding tips into g-strings, because the shares took quite a tumble when the news of the indictment came out ... but I'd like to hear his reaction.

RICK 1-yr Chart

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