Great Moments in Capitalism: The 1989 Mustang Ranch IPO

Mustang Ranch, Inc. prospectus cover
The cover of the February 1989 Mustang Ranch, Inc. prospectus.

So at one point in My Brilliant Career I was given the task of vetting any IPOs (Initial Public Offerings) the brokers in the office wanted to sell to clients. While generally they had good intentions, a couple of them occasionally brought in some real gems. Nothing ever quite compared to the IPO for Mustang Ranch, Inc. If you have designs on opening a brothel and want to see how it's supposed to be done, take a read through the Mustang Ranch, Inc. prospectus dated February 10, 1989 (WARNING: This PDF is about 38 Meg!). The big issue here was that the operators of the Mustang Ranch brothels had a beef with the IRS because the IRS said the prostitutes were employees but owners Joseph and Sally Conforte maintained that the girls were independent contractors. There was a big tax liability hanging out there due to the lack of payroll taxes being paid.

Apparently it engendered a lot of interest. You can read this March 1989 AP Story Bordello Shares Selling in Six States, District of Columbia, quoting prestigious underwriter American Wallstreet Securites*, Inc. President Eric Walloga about how much interest there is in "the most unusual offering in the history of Wall Street". He wouldn't stretch the truth, would he?

In my infinite wisdom, after careful consideration, I said, no, ALLIED Group Securities was not going to flog the stock of a whorehouse in Nevada. Besides, American Wallstreet Securities hadn't registered the stock in Iowa. Disappointed, the brokers went off down some other path. Amused, I held on to the prospectus and it lay for a couple of decades in a file cabinet in our basement. Recently, whilst clearing things out, I found it and thought it would be illuminating and informative to post it online. You're welcome.

(Actually, now I shed a tear. I see there's a couple of these prospecti on sale on Amazon for $80 and some dealer of market oddities wants $375 for a red herring of the offering. Here I just went and sliced off the spine so I could feed it through the scanner! Oh well, the sacrifices we make trying to push forward the frontier of human knowledge!)

The IPO didn't come off. This is more the pity because, buried back on page 50 is this:

On July 28, 1988, the Board of Directors took action to approve an agreement between the Company and LeRoy Nieman, Inc. to retain the services of LeRoy Nieman to create the original art for the Commemorative Certificates to be issued by the Company in connection with the initial public offering of its Common Stock.
Mustang Ranch, Inc. stock certificate
A photo of a Mustang Ranch stock certificate though, sadly, not the LeRoy Nieman version. The Mustang Ranch corporate seal on here is dated 10/21/1987, two days after the 1987 stock market crash and a year and a half before the prospectus date, so perhaps this offering was in the works for a while. Thanks to Jamie from San Francisco for this photo (see the large version here).

Actual stock certificates were pretty common in those days and often quite lovely, beautiful printing of the Glories of Capitalism (bridges, steel mills, trains, topless babes in robes). I expect these would have been seedy and garish. On the whole, I like Neiman's art somewhat less even than that of Thomas Kinkade, but Neiman was big in the Playboy/Vegas/pro sports circles in those days and so some lurid stock certificates would have fit right in. Nieman would have been paid the proceeds of the sale of 50,000 shares for these efforts. This section is right above the bit where they discuss an employment agreement for a guy who would have become the Company's Vice President of Brothel Operations. Man, that would look great on the old résumé!

Here's some news from the Bangor Daily News: Mustang Ranch Stock Sale falls through. It's the May 11, 1989 edition. Appropriately, if you go to the bottom of the page, there's an ad with the tagline "No Penalty for Early Withdrawal", but it's just for CDs. CDs paying 9.25% for 91 days. Sheesh, those were the days.

When the stock sale didn't go through, things went badly for the brothels. In my files along with my original Mustang Ranch, Inc. prospectus was a page from the Wednesday, November 14, 1990 Des Moines Register with the article Sale at defunct brothel lures over 1,000 bidders which I also scanned. I certainly hope they weren't buying the sheets! Ewwww.

A quick look at wikipedia's Mustang Ranch article puts all this in larger context. It's all there; the origins in some double-wide mobile homes, which burned; the refusal to serve black customers for a while; the murder of a possible lover of Sally Conforte; the tax fraud case and subsequent flight to Brazil; the dispute over the name Mustang Ranch with the guy who would have become VP of Brothel Operations; moving some buildings to a new location; the 2007 burning down of the buildings in a fire department training exercise; the final BLM land reclamation project along the Truckee River.

Now the site is back to sun-dappled waters among the cottonwoods. As they say, it's hard out there for a pimp.

* In 1989, we didn't have the Internet. Now we do, and I could do some backgrounding. American Wallstreet Securities was incorporated in Florida (of course) on 9/15/1987, just in time for the 1987 stock market crash. It ceased operations in October 1990 and was declared Inactive by the state for lack of filing an annual report on 10/11/1991. Is it any surprise that one of the owners, Kevin Ward, was permanently barred from the industry? It's the second item in that SEC digest. You can also read a 1991 article in the Sun-Sentinel outlining how, under an assumed name, Ward then worked on gambling lobbying in Florida. The other main character involved with the firm was Eric Walloga, who sounded boisterously shady back then. He went on to a career in print sales and alleged sexual harassment but recently sold a house worth way more than mine and seems to be involved in youth hockey, so maybe he's improved with age.

Page last updated 4/23/2014

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