David Zinberg is the CEO of BIDZ.com (BIDZ), one of the largest online jewelry retailers. This year, the website is expected to auction $250M in jewelry to buyers across the world. But Zinberg is unhappy that the stock price of his growing company has fallen to $8.72 from $22.50 over the past nine months and blames naked short sales for the depressed stock price. Barron's Bill Alpert thinks the low share price may have just as much to do with the cadre of shady business associates Zinberg has collected over the years.
Zinberg himself doesn't have a criminal record, but several of his partners and key staff do, and there have been additional arrests and convictions during their employment at BIDZ. A company statement said Zinberg was unaware of his associates' rap sheets, and VP Leon Kuperman insists there is nobody in the company today with a criminal record. But Kuperman also admits that the company only started investigating allegations recently after its board received an anonymous letter. This past Wednesday, BIDZ received a first look at documentation alleging the company's co-founder and director was managing an illegal strip club while he was CFO in 1999. His alleged partner for the strip club was a licensed agent for several of Zinberg's pawn shops. These are only two of a long list of criminal allegations and convictions.
Calling the stock undervalued, BIDZ bought back $10M of its own stock this month and Zinberg says it plans to buy another $10M. Company officials waved off any criminal past as no longer relevant, but that may not be true for investors who are understandably hesitant to invest in a company dogged by lawsuits, arrests, and convictions.