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Celsius was surely feeling pretty ‘Low’ after Rapper Flo Rida was awarded $82 million in damages in his lawsuit against the energy drink brand.
The Backstory
In 2014, Celsius and Flo Rida entered into an endorsement deal to help “globally market and promote all aspects of the Celsius brand.” This deal turned sideways when Celsius promised Flo Rida a multitude of shares in Celsius to be conveyed over the course of the endorsement campaign, but never delivered. Before the endorsement deal, individual shares in Celsius were valued at less than a dollar. It’s said that due to Flo Rida and this endorsement deal, Celsius shares now sit at over $100 USD per share. Over the course of the 4-year endorsement deal, Flo Rida was supposed to be awarded 250,000 company shares, a contract worth 500,000 shares, and royalties. While he was awarded the 250,000 shares and compensated accordingly, Celsius attorneys claimed that Flo Rida wasn’t entitled to any other funds because the company hadn’t fully taken off by the end of the agreement. And with judgment in favor of Flo Rida, he now stands to gain $82 million in damages.
The Small Business Takeaway
Most small businesses are keen to find a path toward growth. A lot of times they are keen to find that path in the shortest amount of time possible. And when you want to take the rocket-propelled approach, you’ve got to be extra cognizant of the deals you make.
Small Business Lesson One: Make Sure You Can Perform Your Contractual Obligations Before You Commit To them
If you don’t think you can pay the endorsement fee. Or, as a more practical example, if you aren’t sure that you can commit to a certain term (i.e. do you really have the insurance the agreement is asking for? Do you really know that this agreement doesn’t cause you to breach any other agreement with some other party?), then don’t commit to it.
Failure to uphold your obligations under a contract lead you right to the courthouse steps.
Small Business Lesson Two: Make Sure The Other Party Can Perform Their Contractual Obligations
The same goes for the other side. Vet the other party. Make sure that they are able to truly commit to the deal in all aspects. Make sure they have the money to pay you. Make sure they have the authority to enter into the deal. Make sure that they won’t be breaching any other agreement by entering into one with you.
Don’t be shy about this stuff. Because you’ll have no choice but to come face to face with it if you wind up in a lawsuit over things that could have (cough, should have, cough) been discussed and ironed out before inking the deal.
Small Business Lesson Three: The Court of Public Opinion Can Make Or Break Your Brand Equity
Take Celsius as an example of this. On January 17, 2023, Celsius shares were valued at $112.68 per share. News of the Flo Rida judgment started breaking headlines on January 18, 2023. On January 18, shares were valued at $101.83 and bottomed out on January 19 at $97.81. This is about a 10% loss in value, which according to the calculations of some analysts is an approximate loss of $800 million. Ouch.
Sure, Celsius is a big player. And the losses are steep. But what does that mean for you?
Well, chances are you’re not going to see a loss of company value in the same way as a big box brand like Celsius. But what you will feel is the financial obligation that comes along with a judgment against you in court. Forking out dough because you didn’t vet the terms of the deal (and whether or not you could perform it short and long term) is a major opportunity cost for small business. That money could’ve been used for brand building!
So, the moral of the story is, protect your business and be cognizant of the deal terms you execute. Always. And especially if the other party is a public figure.