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Hometown International

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Maybe more of a HS wrestling angle, but has anyone followed this story?  I don’t know much about the stock market, but seems very weird.

An NJ coaching legend is the CEO of a deli that was worth $100 million (although it may have dropped now, not sure) that’s only done $35k in sales in the last 2 years.

Never heard of this website, but thought this article was a little better read than some of the mainstream ones, throwing in a few more wrestling tidbits and describing Paulsboro pretty accurately - https://defector.com/a-cnbc-reporter-ruined-my-lunch-plans-a-visit-to-the-n-j-deli-worth-100-million/

Doesn’t seem that Morina (the coach) has actually been accused of anything, but apparently the company does have a lot of shady connections, including with one of Morina’s HS teammates - https://www.inquirer.com/business/hometown-international-deli-james-t-patten-securities-barred-wall-street-20210421.html

And in an interesting twist, the NJ state tournament is this weekend.

 

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The company also issued 20 warrants per share that are not transferable. So, if you buy the shares the warrants stay behind, subjecting you to massive dilution. Yet another good reason not to buy this stock. On a fully diluted basis it is actually a $1.9 billion market cap company, again on 35k in sales (not profits) in the past 2 years.

The good news is that the OTC market "de-listed" the stock two days ago and put it on its Caveat Emptor list.

https://www.otcmarkets.com/market-activity/compliance-statistics#caveat-emptor

You have to love the use of the skull and cross bones icon.

Also of interest is that when the company did a capitalization they sold 2.5 million shares at $1 each to the same people that they then signed consulting agreements with. Effectively, the money goes in a circle. I think the game is to hope for a high enough stock price through pumping temporary money into the company (they got it) to make exercising the options valuable (they are). But the actions of the OTC make it very hard to then sell the stock to actually realize the profit.

Either way, I can't help but think it is going to be the high school wrestling coach holding the bag when the inevitable SEC action against the company comes. He got in bed with some shady characters for who knows what reason and now he will likely be the worse for it.

 

Edited by Wrestleknownothing
Fixed link

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4 hours ago, Wrestleknownothing said:

The company also issued 20 warrants per share that are not transferable. So, if you buy the shares the warrants stay behind, subjecting you to massive dilution. Yet another good reason not to buy this stock. On a fully diluted basis it is actually a $1.9 billion market cap company, again on 35k in sales (not profits) in the past 2 years.

The good news is that the OTC market "de-listed" the stock two days ago and put it on its Caveat Emptor list. 

https://www.otcmarkets.com/market-activity/compliance-statistics#caveat-emptor

You have to love the use of the skull and cross bones icon.

Also of interest is that when the company did a capitalization they sold 2.5 million shares at $1 each to the same people that they then signed consulting agreements with. Effectively, the money goes in a circle. I think the game is to hope for a high enough stock price through pumping temporary money into the company (they got it) to make exercising the options valuable (they are). But the actions of the OTC make it very hard to then sell the stock to actually realize the profit.

Either way, I can't help but think it is going to be the high school wrestling coach holding the bag when the inevitable SEC action against the company comes. He got in bed with some shady characters for who knows what reason and now he will likely be the worse for it.

 

Thanks, I'm changing my name to Marketknownothing.

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6 hours ago, 1032004 said:

Maybe more of a HS wrestling angle, but has anyone followed this story?  I don’t know much about the stock market, but seems very weird.

An NJ coaching legend is the CEO of a deli that was worth $100 million (although it may have dropped now, not sure) that’s only done $35k in sales in the last 2 years.

Never heard of this website, but thought this article was a little better read than some of the mainstream ones, throwing in a few more wrestling tidbits and describing Paulsboro pretty accurately - https://defector.com/a-cnbc-reporter-ruined-my-lunch-plans-a-visit-to-the-n-j-deli-worth-100-million/

Doesn’t seem that Morina (the coach) has actually been accused of anything, but apparently the company does have a lot of shady connections, including with one of Morina’s HS teammates - https://www.inquirer.com/business/hometown-international-deli-james-t-patten-securities-barred-wall-street-20210421.html

And in an interesting twist, the NJ state tournament is this weekend.

 

The only thing I can say is this dude is pretty close to NJ high school royalty.  Paulsboro has been around and been really good pretty much forever.  His is the only name I remember hearing as the coach for paulsboro ever at Nj states

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2 hours ago, 1032004 said:

Forgive my ignorance but what exactly does this mean?  Was that the only place it was traded?  

Yes. It is an OTC markets stock. That means it is not listed on any exchange (NYSE, Nasdaq, etc). So, technically it was not de-listed because it was never listed in the first place. It is hard to find a broker who will let you trade it. In fact the average daily volume prior to last week was a few hundred shares per day. The OTC Market is reserved for companies that can not satisfy exchange listing requirements. It is a real wild west kind of market, full of questionable companies. To get added to their caveat employ list you need to be the real worst of the worst.

I see that I had a bad link in my original message. Hopefully I do better with this one.

https://www.otcmarkets.com/market-activity/compliance-statistics#caveat-emptor

Edited by Wrestleknownothing

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9 hours ago, Wrestleknownothing said:

Yes. It is an OTC markets stock. That means it is not listed on any exchange (NYSE, Nasdaq, etc). So, technically it was not de-listed because it was never listed in the first place. It is hard to find a broker who will let you trade it. In fact the average daily volume prior to last week was a few hundred shares per day. The OTC Market is reserved for companies that can not satisfy exchange listing requirements. It is a real wild west kind of market, full of questionable companies. To get added to their caveat employ list you need to be the real worst of the worst.

I see that I had a bad link in my original message. Hopefully I do better with this one.

https://www.otcmarkets.com/market-activity/compliance-statistics#caveat-emptor

Thanks for the info.  So what happens to the shares/value?  Am I reading the site correctly that someone can still buy (and I assume sell) stocks designated “caveat emptor,” it’s basically just saying “buyer beware.”  It appears as if there was still activity yesterday for example.

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10 hours ago, 1032004 said:

Thanks for the info.  So what happens to the shares/value?  Am I reading the site correctly that someone can still buy (and I assume sell) stocks designated “caveat emptor,” it’s basically just saying “buyer beware.”  It appears as if there was still activity yesterday for example.

You are reading that correctly, however not every broker will handle an order in a caveat emptor stock. For example, if you try buying this in a Fidelity account you will get a message in bright red letters that says: Opening transactions for Caveat Emptor are not permitted because of the risks associated with these securities and all Microcap securities.

On the other hand, it looks like Schwab allows it (though it is hard to know for sure with the market closed). I am also told Robinhood will not let you trade this in their accounts. The next step after caveat emptor is a suspension of trading, but until then it is like any other stock where it is worth what someone will pay for it.

The current theory is that institutions are trading this rather than retail because many retail brokers will not allow trades. But, there is really no way to know that for sure. Why an institutional trader would want this is beyond me.

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It's possible they are planning a reverse merger with a private company or some other announcement which would lead to a rally. How the stock is $13 is a mystery. Maybe they will align with a crypto miner or non-fungible token enterprise. Thanks for the info, my broker doesn't support this but it is interesting.

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"

Going forward, we intend to seek, investigate and, if such investigation warrants, engage in a business combination with a private entity whose business presents an opportunity for our shareholders. Our objectives discussed below are extremely general and are not intended to restrict discretion of our Board of Directors to search for and enter into potential business opportunities or to reject any such opportunities. We have no particular business combination in mind and have not entered into any negotiations regarding such a combination. Neither our officers nor any of our affiliates has engaged in any negotiations with any representative of any company regarding the possibility of an acquisition or combination between our company and such other company. We have not yet entered into any agreement, nor do we have any commitment or understanding to enter into or become engaged in a transaction.

 

We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business. Further, we may acquire or combine with a venture that is in its preliminary or early stages of development, one that is already in operation or one that is in a more mature stage of its corporate existence. Accordingly, business opportunities may be available in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities difficult and complex."

https://ih.advfn.com/stock-market/USOTC/hometown-qb-HWIN/stock-news/84682196/annual-report-10-k

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1 hour ago, Drew87 said:

Sounds like they are preparing a backdoor listing for some company.  There are companies always trying these hustles, and frankly, if you can do it it works.

The only problem with that is who would pay ~$2 billion (fully diluted market cap) or even $100 million (un-diluted market cap) for a backdoor listing. Because I know you are a Bloomberg fan I offer you this from Matt Levine's Money Stuff article on Bloomberg:

"The theory, which we have discussed before, is that if you have a public company with (1) good, proper, current Securities and Exchange Commission filings and (2) not much in the way of a business, that is an attractive merger target for a private company that would like access to U.S. public stock markets without the scrutiny of an initial public offering. Some private company would pay up to merge with that sort of a public company, quickly get rid of its small operating business and use its public status to raise money. Linhorst finds some other companies that have some connections to Hometown’s shareholders, that pay those shareholders thousands of dollars for vague consulting services, and that seem to be shell companies hunting for merger targets.

Still, “pay up” means, like, a few million dollars? Like, this deli should command a higher price than any other money-losing deli, because it has a public company with current U.S. securities filings attached to it, so it can be used to take a company public. That can be worth money, to a smallish shady-ish company that would like to go public. It can’t be worth $2 billion. Even the shadiest company can find a way to go public for less than $2 billion.

I still don’t know what’s going on with the deli, and I don’t really want a brick through my window either, but the obvious explanations don’t really work. “Shell company for a reverse merger scheme” is perfectly fine as a theory, and it would explain some of the corporate mechanics, but it does not explain a $2 billion (or, fine, $100 million) valuation. “Pump-and-dump to sell lots of stock to retail investors” has the right basic shape, but there’s been no pumping — nobody at the deli has been touting it, and it’s only in the news because David Einhorn wrote an investor letter about how bad it is — and no dumping: The stock barely trades, and nobody is getting rich by selling it to retail investors. 

Occasionally in the crypto world you see parody projects to get a really high market capitalization for a really silly coin. The joke is obvious. You create a new token, you issue 1 trillion tokens to yourself, you sell 0.001 tokens to your buddy for $1, and, bam, your token has a $1 quadrillion market cap and your holdings are worth $999,999,999,999,999. And then you post about it on Medium and everyone is like “lol nice one, market cap is a flawed way to measure the aggregate value of something that doesn’t trade very much or at arm’s length.” It is understood to be an art project, a commentary on post-modern capitalism, rather than a real economic thing. Nobody thinks your token is “worth” $1 quadrillion; that’s just its market cap.

I know nothing about the deli but I prefer to imagine that it’s that sort of art project. There it is, off in New Jersey, a deli that is never open with a stock that never trades, but that is somehow a $2 billion public company, just because it can be.

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20 minutes ago, Wrestleknownothing said:

The only problem with that is who would pay ~$2 billion (fully diluted market cap) or even $100 million (un-diluted market cap) for a backdoor listing. Because I know you are a Bloomberg fan I offer you this from Matt Levine's Money Stuff article on Bloomberg:

"The theory, which we have discussed before, is that if you have a public company with (1) good, proper, current Securities and Exchange Commission filings and (2) not much in the way of a business, that is an attractive merger target for a private company that would like access to U.S. public stock markets without the scrutiny of an initial public offering. Some private company would pay up to merge with that sort of a public company, quickly get rid of its small operating business and use its public status to raise money. Linhorst finds some other companies that have some connections to Hometown’s shareholders, that pay those shareholders thousands of dollars for vague consulting services, and that seem to be shell companies hunting for merger targets.

Still, “pay up” means, like, a few million dollars? Like, this deli should command a higher price than any other money-losing deli, because it has a public company with current U.S. securities filings attached to it, so it can be used to take a company public. That can be worth money, to a smallish shady-ish company that would like to go public. It can’t be worth $2 billion. Even the shadiest company can find a way to go public for less than $2 billion.

I still don’t know what’s going on with the deli, and I don’t really want a brick through my window either, but the obvious explanations don’t really work. “Shell company for a reverse merger scheme” is perfectly fine as a theory, and it would explain some of the corporate mechanics, but it does not explain a $2 billion (or, fine, $100 million) valuation. “Pump-and-dump to sell lots of stock to retail investors” has the right basic shape, but there’s been no pumping — nobody at the deli has been touting it, and it’s only in the news because David Einhorn wrote an investor letter about how bad it is — and no dumping: The stock barely trades, and nobody is getting rich by selling it to retail investors. 

Occasionally in the crypto world you see parody projects to get a really high market capitalization for a really silly coin. The joke is obvious. You create a new token, you issue 1 trillion tokens to yourself, you sell 0.001 tokens to your buddy for $1, and, bam, your token has a $1 quadrillion market cap and your holdings are worth $999,999,999,999,999. And then you post about it on Medium and everyone is like “lol nice one, market cap is a flawed way to measure the aggregate value of something that doesn’t trade very much or at arm’s length.” It is understood to be an art project, a commentary on post-modern capitalism, rather than a real economic thing. Nobody thinks your token is “worth” $1 quadrillion; that’s just its market cap.

I know nothing about the deli but I prefer to imagine that it’s that sort of art project. There it is, off in New Jersey, a deli that is never open with a stock that never trades, but that is somehow a $2 billion public company, just because it can be.

Hahaha, I do actually like Bloomberg compared to pretty much every other media outlet in the English speaking world,  when you write about money all day, you wind up being rather objective on everything else.  

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24 minutes ago, Wrestleknownothing said:

There it is, off in New Jersey, a deli that is never open 

Hey hey hey!  It's open: https://www.phillymag.com/news/2021/04/20/100-million-deli/ and https://www.nj.com/food/2021/04/i-ate-lunch-at-nj-deli-supposedly-worth-100-million-heres-my-2-cents.html

Another interesting article I thought from the same guy I linked to earlier (I really had never heard of that site before last week) - https://defector.com/despite-stellar-cheesesteaks-hometown-delis-stock-stays-flat/

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Sadly, wrestling coach Paul Morina was demoted. He is no longer the President, CEO, CFO, and Treasurer. He just runs the deli now.  He will have to console himself with his 1.5 million shares worth $18.5 million.

https://www.sec.gov/Archives/edgar/data/1632081/000121390021026506/ea140941-8k_hometownintl.htm

 

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On 5/18/2021 at 4:49 PM, Wrestleknownothing said:

Sadly, wrestling coach Paul Morina was demoted. He is no longer the President, CEO, CFO, and Treasurer. He just runs the deli now.  He will have to console himself with his 1.5 million shares worth $18.5 million.

https://www.sec.gov/Archives/edgar/data/1632081/000121390021026506/ea140941-8k_hometownintl.htm

 

I feel like this story kinda disappeared after this?  Is the deli still valued crazy high?

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19 hours ago, 1032004 said:

I feel like this story kinda disappeared after this?  Is the deli still valued crazy high?

The numbers are still hilarious on HWIN. The last official price is 13.75 giving it an undiluted market value of $107mm, but for the month of October the average daily volume was a whopping 2.4 shares per day. They really just exist as a shell intended to merge with a company seeking a US exchange listing. They need to deli to avoid the deadline for mergers imposed on SPACs. So they run the deli at a lose and keep plugging along.

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