Last week, RCI Hospitality Holdings Inc. (NASDAQ:RICK) announced that its CEO and CFO, Eric Langan and Bradley Chhay, will be stepping down, marking the latest shake-up at the company hit by significant legal and regulatory turbulence over the past year.
Comes Days After Massive Buyback
According to a press release issued by the company on Friday, Langan will continue to serve on its board, while naming Travis Reese and Albert Molina as interim CEO and CFO, respectively, without offering any explanation for this abrupt change. Chhay will “continue to be employed” by the company as per the release.
This comes just days after the company announced a massive $30 million stock buyback to acquire 821,000 shares owned by hedge fund ADW Capital Partners, L.P., which was, until recently, a major shareholder in the company.
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The shares were also acquired from ADW at a considerable 50% premium, at $36.54 per share, compared to the current market price at $24.36, with $8 million being paid out in cash and $22 million in two-year seller financing at 12%.
It is worth noting that ADW Capital Partners is owned by Adam Wyden, the son of Sen. Ron Wyden (D-OR), a Democratic Senator from Oregon. This has led to growing speculations on social media regarding a potential further complication in the company’s current legal issues.
Neither RCI Hospitality nor ADW Capital immediately responded to Benzinga’s request for a comment on this matter. This story will be updated as soon as we receive a response.
Tax Fraud, Bribery And Other Legal Issues
Earlier this year, the adult entertainment company and five of its executives were indicted for multi-million dollar tax fraud and bribery charges, with allegations that the company had been bribing a New York state tax auditor to evade over $8 million in sales taxes.
Last year, activist short-seller Edwin Dorsey of Bear Cave Research highlighted a destructive fire at one of RCI’s nightclub locations, while calling it “uninvestable.”
Before this, Dorsey had alleged raids at the company’s Houston office and New York location, saying, “Numerous law enforcement agents were both outside and within public view inside of Rick’s property, although there did not appear to be any emergency or emergency vehicles in the area.”
The stock is down 74.52% since its all-time high in January 2023, with a 57.61% year-to-date decline, amid mounting legal concerns. Shares were down 1.10% on Friday, following the announcement of the management change, closing at $24.36.
RCI Hospitality does poorly across the board in Benzinga’s Edge Stock Rankings, with an unfavorable price trend in the short, medium and long terms. Click here for deeper insights into the stock, its peers and competitors.
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