Should You Trust Penny Stocks Endorsed by Celebrities?

A big name may not always equal big opportunity.

It’s all around us. Branded tennis shoes, hats and apparel worn by top-ranked, world-famous tennis players. NASCAR drivers and their cars blanketed in corporate logos. Famous models and actresses designing and promoting furniture lines. Top-selling country singers performing with beverage company logos adorning their stages, their tour buses and their fan t-shirts. Everywhere we turn, companies are promoting themselves with the help of famous people.

Why should penny stocks be any different?

Penny Stocks Are Not Different

They are corporate entities promoting themselves with the help of famous people, celebrities and big names that potential investors may recognize. Names that potential investors may perhaps even respect. These ventures are promoting their worth through celebrity endorsement.

Penny Stock Investments Are Not Right for Everyone

While the penny stock market can potentially produce sizable profits, it can also deliver significant losses. It has to fit a particular type of investor, one who is suited to such extremes. The point is, simply because a famous person encourages investors to participate in a particular penny stock does not automatically indicate an opportunity for investment success. The micro-cap market is rife with fraud and the SEC continues to routinely bring cases against stock promoters, financial advisors and others for operating pump-n-dump schemes and other frauds.

Taking a Close Look

Bloomberg Business published an article in May 2015 about four-star Army general Wesley Clark – former NATO commander – and his involvement on the boards of at least 18 public companies, 10 of which are penny stock organizations. While Clark denies lending an endorsement to these companies, one of his promotional videos includes the suggestion “we’d love it if you joined us with an investment” and the videos are filmed in a set resembling the Oval Office.

Is Clark a qualified expert on dispensing advice? Is his celebrity encouraging investors to invest? That’s a subjective judgment call. Perhaps a more relevant question is this: how have these 10 penny-stock companies performed since Clark joined their boards? According to the Bloomberg Business article, all but one of the 10 lost value during his tenure.

Choose Your Investments Wisely

And this is just one example of penny stock performance promoted by a famous person. Investors must choose investments wisely, do their homework on the ventures they choose to invest in, and seek appropriate investment advice when necessary.

If you use the services of a professional financial broker or advisor, be wary of those promoting penny stocks if you don’t feel the investments are in line with your long-term financial strategy. It’s your money and your choice on how to invest. Our attorneys routinely represent investors in FINRA arbitration and court for losses in the penny stock market.

Silver Law Group is a national securities arbitration and investment fraud law firm. To discuss your rights as an investor, contact us today.