Rick's Cabaret International, Inc. Raises $9.2 Million to Augment Acquisition

HOUSTON--(BUSINESS WIRE)--Rick's Cabaret International, Inc. (NASDAQ: RICK), the nation's leading group of upscale gentlemen's clubs, said today it has completed a new $9.2 million round of financing through convertible debentures.

“We are currently having ongoing negotiations over several properties and we are constantly looking for clubs that fit our model and have the potential to become strong contributors to our growth story.”
The funds will be used to augment cash the company has accumulated that can be used to make acquisitions of additional gentlemen's clubs or chains of clubs or for other purposes. Rick's Cabaret currently owns 20 clubs nationwide with a 21st club scheduled to open later this summer.

“The new funds mean we have more than $18 million in our war chest to acquire clubs that will be accretive to our earnings,” said Eric Langan, President and CEO of Rick's Cabaret. “We are currently having ongoing negotiations over several properties and we are constantly looking for clubs that fit our model and have the potential to become strong contributors to our growth story.”

“Mr. Langan said he expected private owners of several major clubs may offer their properties for sale before the end of 2010 in an effort to leverage the current applicable long-term capital gains rates, which are set to expire at the end of this year. Absent some modification to applicable law, the current long-term capital gain rate of 15 percent will increase to 20 percent for all higher income taxpayers beginning in 2011.

The new three-year debentures bear interest at 10 percent per annum and can be convertible into shares of Rick's common stock at $10.25 per share. The debentures are redeemable by the company on or after six months from issuance if the closing price of Rick's stock is at least $13.47 for 20 consecutive trading days. In addition, the company issued three year warrants exercisable at $10.25 that can be called by Rick's Cabaret if the shares underlying the warrants are registered and the closing price for 20 consecutive trading days is $14.35. Other terms of the debentures and the warrants will be available in the company's 8-K filing with the SEC.

http://www.businesswire.com/portal/site/…

June 28, 2010

22 comments

  • vincemichaels
    14 years ago
    Money makes money, let's see who they buy next
  • samsung1
    14 years ago
    It seems like Rick's likes to buy clubs that make good use of their expensive VIP rooms. I doubt Brad's Brass Flamingo would be a good fit for them with $12 dances.
  • CTQWERTY
    14 years ago
    Too many optimists...

    Their Vegas locale is a hemmorhaging disaster.

    If it were a year ago, they should've parcelled the "war chest" to members of Congress to secure an exclusive contract making them the official adult entertainment club for Armed Forces personnel. With IV direct to the U.S. Treasury, this stock would've zoomed to the stratisphere.

    As stands, the stock is now $7.92, quite a fall from the $15.50 it was at on March 1st of this year. With the Consumer Confidence Index dropping like a rock today and the Leading Economic indicators breaking negative recently, RICK may well be on a roundtrip to $2.20 again. I hope their CEO, Mr. Langan, sold some of his shares off.
  • minnow
    14 years ago
    The big question: How would a corporate chain buying out clubs and doing things "their way" ( whatever that may be) be benificial to Tuscl clubgoers experience? IMO, it depends. If "target" was a declining club going out of business, maybe so. But I can think of plenty of independent, or local chain clubs, where I'd sure hate to see it bought by a corporate entity, and have the unique things that made it attractive to so many clubgoers quashed in the name of corporate cookie cutter design, and funneling of earnings to a central entity.
  • CTQWERTY
    14 years ago
    From MSN Money:

    Recent Insider Trading Activity: Ricks Cabaret International Inc
    Date Name Transaction Num Shares Price(s) Value
    06/16/10 REESE TRAVIS Sold 5,000 $9.30 46,480.00
    05/18/10 REESE TRAVIS Sold 1,495 $10.49 15,682.55
    05/18/10 REESE TRAVIS Exercise 5,000 $2.80 14,000.00
    05/17/10 MARSHALL PHILLIP KENT Purchase 480 $10.35 4,968.00
    01/14/10 WATTERS ROBERT L Sold 16,500 $10.93 180,262.50
    12/30/09 MARSHALL PHILLIP KENT Purchase 755 $8.71 6,579.45
    10/05/09 REESE TRAVIS Sold 6,000 $8.21 49,254.00
    09/04/09 LANGAN ERIC SCOTT Exercise 205,000 $2.52 515,575.00
    08/18/09 WATTERS ROBERT L Sold 3,500 $7.79 27,265.00
    08/18/09 WATTERS ROBERT L Exercise 10,000 $2.54 25,400.00
    08/17/09 REESE TRAVIS Sold 35,000 $7.62 266,770.00
    08/17/09 REESE TRAVIS Exercise 50,000 $2.49 124,500.00

    Insider filings are updated daily and are based on forms filed monthly with the SEC.

    Travis Reese has played RICK well. Exercised and sold options on the same day, 8/17, pocketing a nice chunk of change in the process. But not a single sale by Eric Langdon (???)

    This is interesting: Who's the 6th largest institutional shareholder in RICK?

    Institution Name Shs Held Shs Chg %Chg $Chg* %Out %Port Rpt Date
    Dimensional Fund Advisors, LP 486,145 28,083 6.1 2,301,645 4.8 0.0 03-31-10
    Trellus Management Company, LLC 245,600 150,600 158.5 2,330,480 2.4 0.9 03-31-10
    WestEnd Capital Management, L.L.C. 181,200 156,600 636.6 1,906,080 1.8 1.0 03-31-10
    RBF Capital, LLC 137,858 0 0.0 584,518 1.4 0.4 03-31-10
    Fidelity Management & Research 100,000 100,000 100.0 1,280,000 1.0 0.0 03-31-10
    Pennsylvania Public School Employees Retirement System 95,200 95,200 100.0 1,218,560 0.9 0.0 03-31-10

    The PA Teachers' Retirement System!!!!
  • vincemichaels
    14 years ago
    YAYYYYYYY, let's hear for stripping teachers!!
  • CTQWERTY
    14 years ago
    Vince, how many would approve of their retirement funds being so invested???
  • samsung1
    14 years ago
    Eric Langan had a 2008 salary of $494,713.00

    http://people.forbes.com/profile/eric-s-…

    Here is an interesting interview with him from a few years ago
    http://www.blackbookmag.com/article/eric…

    He sold his baseball card collection to start his first club and it has been growing since then.
  • samsung1
    14 years ago
    Pennsylvania Public School Employees Retirement System is probably like a big fish in a little pond. They might have invested a small percent of their retirement fund into Rick's and that just happens to be a large percentage of Rick's overall value. Still pretty shady though, nice research CT.
  • vincemichaels
    14 years ago
    CT, some will, some won't, the ones that don't like it, I imagine they have choices in the investments they buy, as in my IRA, I can choose from several different areas to invest in.
  • CTQWERTY
    14 years ago
    Thanks, Sam. Sure they have large sums to invest. BUT, they could always buy some more bonds, invested overseas (ex the last financial crisis, lots of growing economies about), or kept it in cash/money market account. Instead, they plowed into some RICK stock. Go figure.

    Vince, I wonder what the explanation is? And do retired PA public schoolteachers get free lappers at Rick's owned clubs?
  • vincemichaels
    14 years ago
    Well, perhaps the advisor to the fund saw potential in the stock(he probably was a customer at one of the Rick's clubs, too) And, gee I wish my fund offered perks like free lappers at Rick's. I'd go to Tootsie's in Miami to cash in. LOL
  • CTQWERTY
    14 years ago
    Vince as long as it was your own money. As I said priorly, there's many options for funds to invest in. Unfortunately, many chasing return, opted to "reach for nickels ahead of the bulldozer" when they bought derivative products.
  • MisterGuy
    14 years ago
    "The debentures are redeemable by the company on or after six months from issuance if the closing price of Rick’s stock is at least $13.47 for 20 consecutive trading days"

    ...which hasn't happened since around-about March of this year.

    "In addition, the company issued three year warrants exercisable at $10.25 that can be called by Rick’s Cabaret if the shares underlying the warrants are registered and the closing price for 20 consecutive trading days is $14.35"

    ...which hasn't happened since late 2007 or 2008.

    Sounds like someone is getting screwed. Rick's stock is a dog now.

    ---------------------------

    "The PA Teachers' Retirement System!"

    LOL...to be fair, it's a system for all educational employees in PA, not just teachers.
  • georgmicrodong
    14 years ago
    <<"The PA Teachers' Retirement System!">>

    <LOL...to be fair, it's a system for all educational employees in PA, not just teachers.>

    It also seems likely that most of them wouldn't know about it, unless someone brings it to their attention. As well, if the retirement fund invests heavily in mutual funds other other such aggregate instruments, it's even less likely. Do the investors on here know *every* stock their funds invest in? While some certainly do, most probably do not. I don't.
  • samsung1
    14 years ago
    CT could be on to something big here lol
  • samsung1
    14 years ago
    A man was in a supermarket when an attractive woman waved, walked up to him and said hello. He was taken aback because he couldn't place where he knew her from.

    "How do I know you?" he asked.

    She replied, "I think you're the father of one of my kids."

    The man thought back to the only time he had ever been unfaithful to his wife.

    "My God," he said "are you the stripper from my bachelor party who had sex with me on a pool table while all my buddies watched and your partner whipped my ass with a riding crop?"

    "No," she said calmly. "I'm your son's grade-school teacher."
  • georgmicrodong
    14 years ago
    ss1: Isn't that a drink commercial on TV too? :)
  • MisterGuy
    14 years ago
    "CT could be on to something big here"

    In all fairness, he really could. I bet an e-mail to the PA fund & all their members would yield interesting results. Maybe one to the media up there as well? Go for it! :)
  • samsung1
    14 years ago
    MG, thanks for the idea. I found their contact page here
    http://www.psers.state.pa.us/root/contac… and used their member feedback form. I used fake name, phone number, and last 4 digits of SS# etc. except for my email. They also have telephone hours 7:30 AM - 5:00 PM Monday - Friday 1-888-773-7748

    Here is the comment I left in the member feedback form:

    This is interesting: Who's the 6th largest institutional shareholder in RICK?
    Pennsylvania Public School Employees Retirement System
    http://moneycentral.msn.com/ownership?Sy…

    Rick's Cabaret is a company that owns several strip clubs around the country. I am shocked that the PA teachers retirement fund would invest their money in such a stock. Please reconsider your investment in RICK and consider something more secure.
    Thank you.
    ===================================
    I got this scripted reply:
    Thank you for submitting your contact information, due to the volume of correspondence that is received at PSERS, it is anticipated that all emails will require at least three business days to provide a response.
  • Dougster
    14 years ago
    It's really not that bad. PE, Price/Book, Debt/Equity are ok. The thing is it's got very low market cap and is incredibly thinly traded so it's going to be subject to high volatility. LVS, MGM, and WYNN are reporting over the next few days. Watch those for an idea of how Vegas is doing. If the market continues rallying, I can see RICK rising as a "growth story". No rush to buy, and it will be a roller coaster, but I'd say it's something worth watching.

  • samsung1
    14 years ago
    LVS and WYNN have both reported good earnings but acknowledge it is asia.

    1. Wynn Resorts Quarterly Profit Doubles After Opening of Second Macau Casino
    2. Las Vegas Sands tops estimates as Asia outperforms
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