Rick’s Texas Nightlife Interests Going Public
HOUSTON (AP) _ There was a time when the only way to invest in a topless club was one dollar bill at a time. But times have changed.
Rick’s Cabaret, the posh Houston topless bar that considers itself a pioneer of its industry, now is publicly traded on the Nasdaq Small Cap Market.
Club owner Robert Watters achieved his dream of taking Rick’s public on Oct. 13. After an initial rejection, the stock opened at $3 a share, and proceeds of the offering totaled $5.6 million. The stock was trading at $3.81 this afternoon.
The man behind the innovation seems to belie his profession. The dapper, bespectacled 44-year-old Canadian has two law degrees, including one specializing in securities, and a master’s degree from the London School of Economics.
But as he recently enjoyed a late lunch from his own buffet while one of the club’s 425 or so dancers worked a few feet away, Watters admitted he loves his job.
``Why would I want to be stuck in an office somewhere else when I can do something I enjoy so much?″ he said.
Nasdaq at first denied Watters’ request to be traded, but Watters appealed and won the chance to put his company’s name on the exchange.
``We took a long, hard look at Rick’s because of the nature of the business,″ Nasdaq spokesman Mark Beauchamp said. ``We concluded it was a legitimate, licensed business that met listing requirements.″
``We have companies from every industry ... not just high-tech stocks,″ he said. ``If anything, Rick’s proves that.″
But he added that other such businesses aren’t flocking to Nasdaq’s door: ``Rick’s does not a trend make.″
Until Rick’s joined them, South Pointe Enterprises was the only adult sexually oriented business listed on the Nasdaq, but the adult movie producer’s issue has foundered recently.
Mustang Ranch, a legal bordello in Nevada, tried to list with Nasdaq five years ago but couldn’t trade in many states. It abandoned its attempt.
While the Rick’s listing is unusual, it’s not new for restaurants and bars to go public, said Lynne M. Collier, restaurant analyst for Rauscher Pierce Refsnes Inc. in Dallas. The Dallas-based Dave & Buster’s chain of entertainment complexes, for instance, recently held a secondary offering.
``The actual size of the companies is getting smaller and smaller,″ Collier said.
The money flowing into the Rick’s coffers will go toward expansion of Watters’ nightlife interests. He plans more discotheque-style dance clubs, like his Tantra across the street from Rick’s, and topless bars.
Intense competition in Houston, which has become a sort of capital of large-scale topless establishments, has caused him to look to places such as Atlanta, New Orleans and Phoenix for new horizons.
``New York has seven (comparable clubs), Los Angeles has three or four and Chicago has just one,″ Watters said. ``Houston has 12.″
Watters also went public to give managers ownership opportunities and to put his securities expertise to practical use.
The club began as the city’s oil-based economy was collapsing in 1983. Houstonian Dallas Fontenot teamed with oil trader Salah Izzedin to transform a defunct disco into a lavish topless bar, furnished with chandeliers and other swank accoutrements.
Watters was Izzedin’s attorney before taking over the club himself after the original ownership pact dissolved. The Rick’s concept spread, causing Houston to become the de facto capital of large-scale topless bars.
Eighteen of its dancers have gone on to appear on the pages of Playboy Magazine, including Anna Nicole Smith. It was there she met her late husband, Houston oil tycoon J. Howard Marshall.
Some Houston city council members once were outraged when they discovered a city official was wining and dining businessmen there with public funds. In 1992, Rick’s issued fancy invitations to attendees to the Republican National Convention.
The club also has been a target of Houston vice squad officers, but Watters said the police have pretty much left him alone since a highly publicized raid three years ago.
``They arrested 43 dancers for public lewdness,″ said Watters, who added that two were convicted of the misdemeanor. ``Lewdness is in the eye of the beholder.″
The reduction of tax credits for business entertainment has stung, as has the thinning out of the white-collar ranks in Houston, which also hasn’t had the brisk convention traffic it once enjoyed.
But Rick’s isn’t hurting. The club brought in nearly $2.6 million in revenue last year and consistently ranks among the top vendors of alcohol in the Houston area.
Just two months ago, Rick’s hosted 350 executives from some of the nation’s stuffiest financial houses. After Watters briefed them on the financial scene at Rick’s, they partook of free food, free drinks and an evening of topless entertainment.
The stock may not be for everyone, however. One 50-year-old man who says he’s been a steady Rick’s customer for more than a decade said he’s only interested in investing on site, $1 at a time.
``I grew up with this place,″ said the man, who didn’t want his name used. ``But I don’t think I’d invest in it.″