We've got until Friday before the next game, that one against the Hawks, so Bobcats news is a bit slow. However, this announcement about an agreement between the Bobcats and a company called SpongeTech caught my eye.
SpongeTech Delivery Systems, Inc. (OTCBB: SPNG) and the Charlotte Bobcats have signed a three year marketing partnership. ANC Sports, one of the Bobcats' newest partners has developed an integrated campaign which features an in-arena and direct to retail strategy to market SpongeTech's products.
Totally usual stuff... good for the Cats to get some more sponsorship money... et cetera... except...I remembered Darren Rovell reported just last month that SpongeTech's advertising agreements with sports teams were unusually aggressive, leading regulators to raise questions about their business.
SpongeTech might have been able to get deals with teams, but they weren’t free. Their director of marketing Jack Schwartzberg told the SportsBusiness Journal that, in 2009, the brand’s marketing budget was $20 million. That’s an outrageous number for a company that had just announced it would gross $50 million on their fiscal year, which ended May 31.
Earlier this month, the Securities and Exchange Commission announced the temporary suspension of trading on its penny stock, which at the time had hit six cents a share, so that the company could answer questions about the accuracy of their auditing practices.
To Google! Before that, Slate's financial blog, The Big Money, posted an extended face-slap of the company, essentially calling it a giant scam.
The company’s filings lead the skeptical reader to some pretty clear conclusions. The first is that Spongetech exists primarily to sell stock, and pretty much everything else comes second.
But the story doesn't stop there. Via @timothysykes, it appears the audit Rovell wrote about was delayed just a few days after the CNBC post went up because the auditor, Deloitte and Touche, resigned from the process. By my rough count after Googling, that would be three accounting firms to leave the company in under a year -- the first two forced out by regulators, it appears, and D&T leaving just to leave a toxic situation.
All that turmoil, including a two week halt on trading, didn't stop the Chicago Blackhawks from signing an agreement with the company. And it didn't stop the Bobcats.
Turmoil? The last few months have revealed SpongeTech to be a sketchy company, in the least, and, eventually, someone's going to be taken for a sucker. I know the organization is hurting for cash, but unless I'm missing something, a relationship with SpongeTech now, after all it's been through, has got to be as ill-advised as it gets. I'll guarantee there's no way the relationship lasts three years.