But It Was Really True Love (From jasoncurious.com)

Once a Jill Kelly Productions contract exclusive and once the wife of company CEO, Bob Friedland, adult video actress Shyla Stylez is now suing him and the company for $4 million, according to a source close to the company. Both Friedland and Stylez have been to court recently to settle the divorce of their marriage, for which it is now revealed that there was no prenuptial agreement. In recent weeks, it has gotten ugly. Jill Kelly herself was subpoenaed and brought into court just weeks ago and was fuming by day’s end.

Spectators say Stylez is suing on the grounds that, as Friedland’s wife, she is entitled to a portion of what he owns, especially since she is bound legally to his company, which prohibits her from continuing her career as an adult performer as she no longer feels comfortable as part of the JKP family.

When contacted, Jill Kelly could only say that her company’s lawyers have advised her against commenting at this time. Shyla Stylez was unreachable.

Read The Extreme Indictment

CLICK HERE. (Sorry but they are images, I had to scan the original indictment)

Houston Don Has a Take on JKP too:

Hi Mike!
I have some experience in the financial world and my take on the whole JKP thing is that they did the reverse merger as a way to minimize the scrutiny their books would receive. Any time a company wants to go public, it has to offer up tons of information to the regulators. By doing it the way they did, they can avoid much of that, which allows a potentially shakier company access to being listed.

Why go public? For them it’s probably as much a means to make possible a way to promote the company-much like the strip club chain, Ricks, did awhile back. It also gives them a chance to cash out at some point which is less likely given the political climate of the country today.

I wish them luck in their pursuit of capital this way. For all the wannabe stock owners out there, such investments tend to lose money unless the company is on solid footing. What assets does JKP really have to offer? It’s contracts and it’s back catalog. I don’t know how much the latter is worth but from what I read, it’s contracts haven’t fared so well. 😉

Take care, Don

Thanks man, I knew my readers would know far more about this than I, theres some things I am just NOT well versed in. Thankfully…y’all are!

Bob Explains the JKP Going Public thing:

Mike:

I can take a stab at this one, since I’m familiar with how this works.

Going public, even for legitimate companies, can be an expensive proposition. It is also a highly-regulated process, which means it can take time.

However, if you merge or acquire an already publicly-traded company …. voila, problem solved, sort of. You still have to pass regulatory muster, which is the reason that these companies often end up being traded on the “over the counter” market, also known as the OTC or the “pink sheets” because of the color of the paper they were traditionally listed on.

Pink sheets, appropriate for a porn company, no?

Now, that strategy happens quite legitimately in tech or around tech companies. The reason is that many tech companies went public during the mania long before they were ready; they’re now in trouble as companies; but they have a value for being public.

So, I’ll give you two real examples of how this happens which I’m familiar with, without naming company names.

First, is around 1995 with a satellite technology company in Phoenix which is about to go belly up. Meanwhile in Ohio, there is a small architectural building products company that makes doors and windows — that sort of thing — that is trying “rationalize” their industry. That is, they recognized that there were a huge number of mom and pop businesses serving local markets, but no real market leader.

Their idea was: we’ll raise capital in the markets; buy up mom and pop shops across the country so we have a national presence; we’ll centralize production in our best facilities; and we’ll be the most efficient producer at the lowest prices. That will give us more business with Lowes and Home Depot. Voila, we become the 600 lbs. gorilla of the industry.

So, they buy up the satellite technology company, which has some inventory and assets (which are of no use to a company making windows) and has publicly-traded shares.

They sell off the assets of the satellite business, they change the name of the parent company and the symbol to reflect their focus on building materials, and now, they’re a publicly-traded architectural building products company with access to the public capital markets to begin buying up their competitors.

Example number two: Mid 1990’s venture capitalists fund two business computer software companies.

One, located in Atlanta, produces something called manufacturing and supply chain planning software — software that helps people figure out the best way to make, warehouse, and ship their products.

The other, also located in Atlanta, produces something called supply chain visibility software — it allows a guy in the warehouse to track all of his inventory, orders, and shipments in real time, so he always knows whether he’s got what he needs on the shelf or will have it on the next truck to fill an order.

In the late 90’s, two of the planning company’s competitors are hot, which gives that company some cachet and it goes public. Life is good.

In 2000, visibility software catches on. Rather than take the visibility software company public, however, the Venture capitalists raise more money — tens of millions — and fund another visibility company in Massachusetts.

Problem is lots of other venture capitalists get the same idea. There are now tons of visibility companies.

Guys in related fields, like the planning company, realize this is a popular idea, so they add visibility to their suite of offerings. It becomes so popular, that everyone adds it to their suite of offerings. Soon, companies like the planning company are giving it away, ala Microsoft and a netbrowser, to sell their core product.

Problem for the visibility companies is this: they expected to sell their product to the planning guys, who are now giving it away.

So now you’re a venture capitalist with two visibility companies (and the one in Massachusetts still has $13 million in cash it hasn’t burned through yet) that are in an incredibly crowded field in which competitors are giving away the product to sell something else. Life is not so good.

Meanwhile, the business environment has cooled, so the planning software business is more competitive than ever — meaning that business needs a little help.

And then there’s this — the smartest guys are at the Atlanta visibility company.

What to do? The Venture guys have the planning company buy the visibility company in Massachusetts. They could care less about the technology. What they want is the $13 million in cash the Mass. company has yet to burn through. Otherwise, they fire everyone but the best talent and close the offices.

With the extra cash, the planning company now buys the visibility company in Atlanta.

Alas, the visibility company brings not only a little cash and some technology, but they also have the smartest business minds of the three companies. So, the name and symbol are changed to that of the visibility company.

In the first case, it didn’t work out so good for investors. The architectural products company borrowed money, bought up all its competitors, and got creamed in the summer of ’97 or ’98 during the Russian bond crisis. There was, you may recall, a economic pull-back then before business really took off. They had to borrow at high interest rates and it killed them. They went bankrupt right before the current building boom, which probably would’ve saved them. Timing is everything.

In the second instance, so far, it’s worked out okay. The three weakened companies have become one stronger company, although they are still in a competitive field.

But beware, NASDAQ can still kick you off the big board, which is what happened to both of those companies, and relegate you to the OTC.

Many small legitimate companies are traded on the OTC. For instance, family-owned businesses in which shares rarely trade are often on the OTC. It’s a way to easily spread out ownership of the company to various family members, and employees. Since the shares rarely trade the public owns very little of the company. Those share typically don’t swing much in price, and they can be hard to sell.

But the OTC is also where a lot of stock market shenanigans take place.

During the stock boom, you’d read stories in the Wall Street Journal about the mafia manipulating small stocks, or about Internet stock chat rooms where rumors would send the price of a stock skyward or into the toilet. Or you’d get an e-mail about some stock guaranteed to go up 100% in the next few months. Almost always those stocks were traded over the counter.

It can be an incredibly volatile place.

JKP could legitimately use the access to public capital that they may have to acquire other production companies; to build a distribution network; to buy up catalogs of quality content; to develop cable content; and so on.

But I still find it unlikely that an investment banker is going to say: Porn. I think our board is looking to find a way into that market, and JKP is publicly traded. Let’s back that pony.

More likely is that JKP could use it as a promotional tool for investors who think that because it’s publicly traded, the porn industry is going legit and there’s going to be huge dollars to be made.

That strategy worked for the Boston Celtics — all sorts of fans have bought shares because they want to own a piece, albeit small, in a professional sports team. Hasn’t been a great investment, but for sports fans and true Celtic’s fan, it’s fun to own a few shares. There’s probably some porn fan out there who wants to literally own a piece of Jill Kelly.

It’s a gimmick but could be a legitimate gimmick.

Or — and I know absolutely nothing about the management of JKP and am not implying in any way that they’re slime — they could use it to fleece investors, which has happened on the OTC. So, it’s theoretically possible if the folks running JKP turn out to be less than ethical that they could use it as a vehicle to attempt to milk the public. Or, if there are less than ethical people looking to get into the porn business, buying publicly traded shares could be a way to do it. Who knows.

I’m not the smartest guy in the world, which could be why I don’t get the business case or see the business model that makes porn ripe for being a publicly traded company for anyone other than, say, Vivid.

Hope that’s useful.

Very useful man, it lays out the scenarios for what may be on the horizon and it explains in excellent detail what happened and why. The only real porn company to have a successful run with going public is Private, at least as far as I know, and Private didn’t backdoor itself in like JKP is doing.