Strip club operator RCI Hospitality’s (RICK) troubles appear to be far from over. A group of stock investors has initiated a class action lawsuit against the company over tax fraud charges brought against the company by New York’s public prosecutor.
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On Sunday, investor rights law firm Rosen Law announced the lawsuit, alleging that RCI concealed the involvement of its executives in bribery to cover up their tax fraud activities. The class action covers the period December 15, 2021, to September 16, 2025.
The investor group argued that RCI and its executives “understated the legal risk facing the company” and provided “materially false” statements about its business, operations, and prospects. As a result of these, “investors suffered damages,” when “the true details” became public, Rosen said in a statement.
RCI Denies Tax Fraud
The class action comes several days after RCI Hospitality, which also operates nightclubs, sports bars, and restaurants, was hit with $8 million in tax fraud charges by the New York Attorney General. The indictment covers five of RCI’s executives and three of its strip clubs in Manhattan — Rick’s Cabaret, Vivid Cabaret, and Hoops Cabaret and Sports Bar.
In a 79-count indictment, Attorney General Letitia James alleged that the executives between 2010 and 2024 “shamelessly” bribed a sales tax auditor with New York’s Department of Taxation and Finance to avoid paying over $8 million in sales taxes to the city. They allegedly gifted at least 13 complimentary multi-day trips to Florida to the auditor.
During these trips, the auditor allegedly received up to $5,000 per day for private dances at RCI-owned strip clubs, including Tootsie’s Cabaret in Miami. Additionally, the executives are said to have covered the auditor’s hotel stays and restaurant expenses during these visits.
However, RCI, in its response, called the indictment “baseless”. The company and its execs vowed to “take all necessary action to defend themselves against these overreaching charges” while still striving for a fair resolution.
RCI Battles Fall in Sales
The indictment comes at a tough time for the strip club operator, which saw its revenue fall by $5 million during its recent Q3 2025. The number dipped from $76.2 million during the same period a year ago.
Building on this, RCI’s same-store sales—revenue from outlets that have been open for at least a year—slid 13.5% during the recent quarter for its military-themed sports bar and grill outfits called Bombshells. Additionally, RCI’s nightclub revenue dipped by 3.7% compared to the previous year, reaching $62.3 million. The company attributed the fall to weaker same-store sales and the effects of a fire at Texas-based adult nightclub Baby Dolls Fort Worth.
What Is the Price Target for RICK Stock?
RICK’s shares have limited coverage from Wall Street analysts. However, TipRanks’ AI Stock Analyst holds a Neutral rating on RICK stock, with a score of 62 out of 100. Moreover, the average RICK price target is $30.00, which indicates a 10% upward potential.
Compare RICK stock to other similar hospitality shares here.