RCI Hospitality Stock Goes Into Tailspin Over Strip-Club Bribery Scandal — But Retail Traders Unfazed

RCI Hospitality Holdings' stock plunged 16% on Tuesday to a more than five-year low after the New York Attorney General indicted the strip club operator and its key executives, including the CEO Eric Langan, for bribery and tax fraud.

A New York state Department of Taxation and Finance auditor and supervisor received "at least 13 complimentary multi-day trips to Florida, where he was given up to $5,000 per day for private dances at RCI-owned strip clubs, including Tootsie's Cabaret in Miami," according to a statement from AG Letitia James' office. RCI executives also allegedly covered the costs of the auditor's hotels and restaurant visits during these trips. 

On at least 10 occasions, Timothy Winata, RCI's controller and accountant, traveled to Manhattan from Texas to provide the auditor with illegal bribes at RCI's Manhattan clubs.

The alleged bribes helped RCI avoid paying more than $8 million in New York City and state taxes from 2010 through 2024, according to the AG's office. The taxes involved the sale of "Dance Dollars," which customers of RCI's strip clubs bought and redeemed for private dances.

Houston, Texas-based RCI, formerly known as Rick's Cabaret International, owns and operates upscale adult nightclubs in major cities, including New York, Miami, and Houston. The company clocked nearly $300 million in revenue last year.

On Stocktwits, the retail sentiment for RICK stock shifted to 'extremely bullish,’ from 'bearish' a day ago, with users arguing that the decline is overdone amid a nearly 3,000% surge in 24-hour message volume.

Shares of the company slid nearly 6% in extended trading on Tuesday.

If the penalties are even three times the alleged taxes evaded, or $24 million, "the company can [easily] pay this," a user said.

The trips to strip clubs for the auditor and the alleged bribes were "authorized, directed and overseen by the 57-year-old Langan, RCI's Chief Financial Officer Bradley Chhay, 41, [Director of Operations Ahmed] Anakar, 58, and 45-year-old Shaun Kevlin, a regional manager for RCI's New York City strip clubs, and later the company's assistant director of nightclub operations," according to the indictment.

Langan personally supervised RCI's negotiations with the auditor and approved payment of bribes, it added. A Stocktwits user pointed out that Langan appears to have deleted his X account.

In a statement to CNBC, Daniel Horwitz, a lawyer for RCI, disputed the allegations against the company and its executives, saying that they "will take all necessary action to defend themselves against these overreaching charges."

With the latest drop, RICK shares are down 5.9% year-to-date.

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