Here’s a piece of advice nobody should need to be told – never invest in a product or company just because a celebrity promotes it.
Duh – right?
While obvious to most everyone reading this newsletter (I hope!), it’s shockingly not-obvious to an alarming number of people.
However, though this advice is positively sound, that doesn’t necessarily mean that all celebrities are bad investors.
In fact, there are plenty of celebs who are incredibly (surprisingly?) smart and hugely successful allocators of capital.
Having said that, before we look at a few celebrity investors doing things right, let’s first highlight a few bad apples that are most definitively not.
Kim Kardashian’s promotion of crypto token EthereumMax serves as a textbook example of how not to use your celebrity for financial gain.
In June 2021, Kardashian—who has some 330 million Instagram followers—posted a Story on the app promoting the token (which has no affiliation whatsoever to the real Ethereum network) without disclosing that the firm behind it paid her $250,000 for the post.
And remember how we said that the seemingly unnecessary advice above was not so obvious to many? As it turns out, of Kim K followers surveyed in a Morning Consult poll who knew about the promotion, 19% say they actually bought EthereumMax…
Those “investors” were in for a surprise when a week later the price and trading volumes of the token dropped by 50% and 75%, respectively.
In the end, the SEC had the last laugh with the regulator using the opportunity to make a loud example out of the reality star with a $1.26 million fine.
Speaking of (loud) reality stars, there’s not much to say about Kevin O’Leary that hasn’t already been said.
Nevertheless, Mr. Wonderful’s relationship with FTX represents another example of a celebrity using their influence in dubious ways for personal gain.
In August 2021, O’Leary—who had previously called crypto “garbage”—entered into an agreement with the now-defunct crypto exchange after it “met [his] own rigorous standards of compliance”.
Of course, we now know that “rigorous standards of compliance” actually just meant a $15 million payday to aggressively promote a company for which no due diligence was conducted.
Staying on the same theme we come to charlatan influencer Anthony “Pomp” Pompliano.
Pomp has never had a bad word to say about any company he is involved with or invested in.
A thesis without a presentation or even an acknowledgement of the other side of the debate is not a thesis at all, it’s merely an “opinion”—and a misinformed one at that.
For a look at this bias in full effect, we turn to his mindless pumping of now-bankrupt crypto lender BlockFi:
Collectively, these three recent episodes give celebrities a blueprint on how not to conduct themselves in the financial markets: careless, dishonest, and opportunistic.
For a template on how to positively leverage stardom, we need not look past Canada’s borders.
While Ryan Reynolds may not always get his movie selections right (Green Lantern is spectacularly bad), when it comes to investments he rarely misses.
In 2018, Reynolds made 2 big and seemingly unrelated moves. One was launching a soon-to-be successful production company (Maximum Effort), and the other was buying a gin business (Aviator Gin).
Using the marketing power behind Maximum Effort, in just over 2 years Reynolds fueled the growth of Aviator Gin to an eventual $610 million exit in 2020.
On his way there, he also became a majority owner (20-25%) in wireless provider Mint Mobile (estimated value of roughly a billion dollars) which has similarly received the Maximum Effort treatment.
Reynolds—whose estimated net worth is north of $150 million—has since sold the production company but stayed on with the acquiring ad tech firm, MNTN.
There, he plays a prominent role in running the business, leveraging his marketing genius as its Chief Creative Officer.
Climbing up the ranks of celebrity investors, few have a better reputation throughout Silicon Valley than Ashton Kutcher, who has come a long way from misplacing his vehicle.
Like Reynolds, Kutcher made his way into investing by way of a production company, Katalyst, which he founded in 2000.
Through connections made via Katalyst, he immersed himself in the tech world and into the angel investor landscape, ultimately going on to create 2 venture funds (A-Grade Investments and Sound Ventures).
He has managed to leverage these deep relationships into domain expertise that has helped him arrive early at some generational companies like Uber and Airbnb.
With a few understandable misses (Theranos notwithstanding) along the way, Kutcher—whose net worth is some $200 million—has an impressive track record that counts other notable tech firms like Spotify, Houzz, Duolingo, Skype, Acorns, and Airtable.
Rounding out our MVP list of celebrity investors is one of the most recognizable personalities on the planet – Shaquille “Shaq” O’Neal.
One of the most gifted basketball players ever earning more than $100 million during his NBA career, Shaq has made significantly more money in “retirement” than he did in his playing days.
Somewhere between the goofball who slings insults tirelessly at Charles Barkley and the graceful giant boxing out 300-pounders lies a savvy investor whose networking prowess makes Reynolds’ and Kutcher’s look like entirely too much work:
Besides knowing a good idea when he hears one—he was also an early investor in both Ring (pre $1 billion Amazon acquisition) and Lyft (pre-IPO)—Shaq has recognized the value in franchise business models.
He’s leveraged that model with his universally recognizable brand to amass a fortune by simply investing in products and companies he uses and likes.
These include Krispy Kreme, Papa John’s, Auntie Annie’s, Five Guys, and 24-Hour Fitness, among others.
Building off knowledge acquired over a (very) successful 15 years in the franchise game, O’Neal—whose net worth is estimated at over $400 million—launched a fast-food franchise business of his own in 2018, Big Chicken, where the delicious chicken comes in Shaq-sized (extra-large) portions.
Looking at the investment journeys of Reynolds, Kutcher, and Shaq, they all share a few common characteristics that are blatantly absent in the aforementioned bad apples above.
All three of these individuals show genuine interest in the products and companies they are involved with. They take an honest approach both in the way they select their investments and in how they promote them.
These are personalities that recognize the value of their brands and have found a way to effectively translate them into value propositions.
This means that, unlike their opportunistic counterparts, these investors are adding value to the relationships they enter.
Something to keep in mind next time you see one of your favorite celebs promoting anything – ask yourself: do they have skin in the game? Have they done their homework?
The answers might surprise you.
Until next time…