Startup IZEA, formerly PayPerPost, has long-been derailed as a joke in the technology industry due to its smarmy business tactic of paying people to covertly blog about products for cash.
Goofy CEO Ted Murphy’s antics have been largely harmless, but his latest move to “go public” and unabashedly ask people to the buy the penny stock is dangerous. The video features a pounding dance track and “get rich quick” infographics that are so over the top they feel more like an SNL skit than what most could consider a classic pump-and-dump scam (see images below).
After talking up a grand vision, Murphy carefully asks people to buy the stock: “Our customers have built this business, and I now invite you to participate as a future shareholder.”
In truth, the firm did not go public but did a back-door IPO (or “reverse merger”). This is when a private company merges with a shell company that is already public and renames it. Rarely is this a successful way to go public, and only the weakest companies pursue it. Fugazi investment banks and lawyers usually handle such transactions.
Fred Wilson is dead set against these transactions because they are typically scams, as he explains in this 2005 blog post.
This is the kind of get-rich-quick activity, powered by third-tier startups, that imploded our industry in 2000. If your dentist or rich uncle from Florida asks you if they should invest, well, you know what to do.