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ARTICLES
Los Angeles Business Journal "Celebrities" October 18, 1999
Stars Get Little Respect as Angels, but Some Fare OK by Frank Swertlow It's not unusual for star to find themselves, almost overnight, turning into multimillionaires. But entertainers read scripts, not the Wall Street Journal, and all too often, they become misguided angels by investing their millions in screwball schemes. "They are celebrity dumb," said Sondra Taggart, a certified financial planner who runs Beverly Hills-based Taggart Group. "They like restaurants. Restaurants are terrible investments, but they are something these people understand. It's a place where they can go and be seen. It keeps their names in lights, unlike investing in Oakland's water bonds." Even when a restaurant chain goes public, there is no guarantee for success. Demi Moore, Sylvester Stallone and Arnold Schwarzenegger were given stock in the Planet Hollywood chain in exchange for their services promoting the company. At the time, the stock they got was worth $32 a share; today it's selling for less than $1. "Their business managers understand real estate, which is all about location," said Leib Orlanski, and partner in Freshman, Marantz, Orlanski, Cooper & Klein, a Beverly Hills-based law firm that specializes in initial public offerings. "But most of these business managers don't know anything about high-tech companies." For all that, there are celebrities who have put their money to good use in non-entertainment or restaurant ventures. Barbra Streisand is a day trader, earning $130,000 in one month on eBay. Robert Redford owns 4.1 percent of Century City-based Mercantile National Bank. Steven Spielberg and Michael Douglas were early investors in Idealab, an Internet incubator that has hatched such success stories ad eToys. And Schwarzenegger has invested in real estate in Santa Monica and Denver, as well as World Gym. Then there are entertainers more business than show. Merv Griffin owns vast hotel holdings, including the Beverly Hilton in Los Angeles. Dick Clark has millions of dollars invested in cable television. Wayne Rogers, who co-starred in the TV series "MASH", is an investment banker with a portfolio that includes convenience stories, a software company and river barges. The craze for investing in Internet companies hasn't gone unnoticed among celebrities either. "They are more savvy," says Lisa Crane, president of Hollywood-based Soundbreak.com and former chief of NBC's Internet businesses. "They have gotten past the smoke and mirrors and are asking a lot of questions and are wondering how they can make sense out of this. Forward-thinking talent that wants to expand will be using the Internet." Jennifer Lopez, the actress and singer, has her own Web site, Jenniferlopez.com. Right now it helps promote her music and films, but it eventually will offer the sales of movies, tapes, photographs and clothing. Antonio Banderas and Melanie Griffith are developing an e-commerce company for health and beauty products. Rock stars seem to be especially interested in the Internet. David Bowie charges $20 a month for access to his Web portal, davidbowie.com, while the artist formerly known as Prince sells merchandise, record and paraphernalia on his site, 1800newfunk.com Rocker. Todd Rundgren, who hasn't had a hit since the '80s, sells his music direct to fans on tr-1.com for a minimum of $20 a year. "They are all thinking, how can we make his work for us?" said Crane, whose company offers recordings of new music artists on the Internet. Rob Deutschman, a managing director at Santa Monica-based Cappello Capital Corp., said many high-tech companies are wooing celebrities to get involved - not as angel investors, but as promoters. Instead of money, they are being paid in stock. William Shatner made a killing off the stock he was given for Priceline.com. "Business people are star struck," Deutschman said. Just as a major name can help guarantee that a movie will have a big opening, it can also help sell a company on Wall Street. And the bigger the name, the more investors are interested in the company. As lucrative as these high-tech investments can turn out to be, they are also highly risky. "Traditionally celebrities are not known as sophisticated money," said Peter Cowen, whose company Peter Cowen & Associates invests in emerging Internet companies. "They have too much, too soon, and they are lured into deals for the wrong reasons. They need money managers who make prudent suggestions." Taggart agrees that celebrities who want to become involved in Internet companies should find an expert to help them. "You need a guide," she said. |
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