Hometown International received national attention earlier this month after Greenlight Capital’s David Einhorn pointed to the company as a sign of excess in the stock market in his quarterly letter.
Despite the company’s market valuation, there was little business to show for it, with the deli generating just $35,000 in revenues over a two-year period.
OTC Markets CEO Cromwell Coulson said in a tweet on Wednesday that Hometown International was delisted from the OTCQB exchange “for not complying with the rules and marked CE for public interest concerns.”
“CE” refers to Caveat Emptor, a label the OTC assigns to companies to warn investors that there may be reason to exercise additional care and perform thorough due diligence before making an investment decision in that security.
To Greenlight Capital’s David Einhorn, Hometown International represented just one of many signs of excess that’s been building in the stock market over recent months.
Hometown, which owns a single deli in New Jersey and recorded annual revenue of just $14,000 in 2020, sports a market valuation of about $100 million. The stock had mostly flown under the radar since it went public in late 2019, rarely trading hands on the over the counter exchange with daily average volume of a few hundred shares.
That is, until Einhorn mentioned Hometown International in his quarterly letter.
“The pastrami must be amazing,” Einhorn quipped. He pointed to Hometown as the kind of company that amateur stock-pickers could lose their money in, and called for regulators to do more to protect investors.
Einhorn’s observation did little to deter trading in the thinly-held stock, whose single largest shareholder acts as CEO, CFO, treasurer, one of its directors, as well as the local high school wrestling coach.
Instead, the stock has moved higher on an explosion in trading volume.
Since the release of Einhorn’s letter, Hometown International surged as much as 17% to a record high of $15.75 on Monday. The move higher was accompanied by a 5,906% surge in daily trading volume.
On Friday, 42,762 shares traded, well above its one-year average daily trading volume of just 712 shares. And on Monday, more than 12,000 shares had exchanged hands as of 2:33 pm ET.
Elite investor David Einhorn blasted market regulators, called out Elon Musk and Chamath Palihapitiya for juicing assets, and praised GameStop champion Keith Gill in a letter to Greenlight Capital investors this week.
The Greenlight president also highlighted “The Big Short” investor Michael Burry’s Twitter exit, and pushed for greater scrutiny of Archegos Capital, the family office that blew up in March. Einhorn’s latest letter was obtained by ValueWalk.
Here are Einhorn’s 11 best quotes, lightly edited and condensed for clarity:
1. “The Fed wants to be ahead of the curve on the downside to protect the stock market and corporate bondholders the economy. Behind the curve is fine on the way up no matter how frothy the stock market the recovery is.” – suggesting the Federal Reserve cares more about stock prices and corporate profits than the economy.
2. “If we swing a little less hard, we should hit more balls.” – on his decision to short fewer individual stocks after several of Greenlight’s positions were hit during the meme-stock frenzy.
3. “Investors discussing why they think GameStop (or any other stock) should go up or down ought to be encouraged. There is no reason to drag anyone before Congress for making a stock pick.” – defending Keith Gill, who goes by Roaring Kitty on YouTube, for his “great call” on GameStop.
4. “The real jet fuel on the GameStop squeeze came from Chamath Palihapitiya and Elon Musk, whose appearances on TV and Twitter, respectively, at a critical moment further destabilized the situation.” – Einhorn suggested Palihapitiya intentionally disrupted Robinhood because it competes with one of his investments, SoFi.
5. “If regulators wanted Elon Musk to stop manipulating stocks, they should have done so with more than a light slap on the wrist when they accused him of manipulating Tesla’s shares in 2018. The laws don’t apply to him and he can do whatever he wants.”
6. “Quasi-anarchy appears to rule in markets. Sure, Dr. Michael Burry, famed for his role in ‘The Big Short,’ reportedly received a visit from the SEC after tweeting warnings about recent market trends – and decided to stop publicly speaking truth to power. But for the most part, there is no cop on the beat.” – complaining that regulators have been defanged, and corporate executives can break the rules with impunity.
7. “Hometown International owns a single deli in rural New Jersey, yet it reached a market cap of $113 million in February. The largest shareholder is also the CEO/CFO/treasurer and a director, who also happens to be the wrestling coach of the high school next door to the deli. The pastrami must be amazing.” – underscoring the number of questionable companies that regulators are overlooking.
8. “From a traditional perspective, the market is fractured and possibly in the process of breaking completely.” – highlighting a dangerous lack of regulation and the risk of casual investors getting scammed.
9. “It was as if Bernie Madoff had been told to pay a small fine and stop ripping off New Yorkers, but to go ahead and have fun with the Palm Beach crowd.” – criticizing regulators for only slapping the Tether crypto exchange with a $19 million penalty and a New York ban.
10. “If Congress wants to understand why GameStop stock did what it did, or more recently how the ‘Arch-Egos’ fund cornered the market in a handful of stocks, it would be better to call to account the absentee regulators and their philosophical backers.”
11. “‘Arch-Egos’ was able to buy up most of the float of GSX Techedu, causing the stock to soar 400% in the face of unrefuted allegations of massive fraud. The SEC has an ongoing investigation of GSX but appears to not have noticed a single fund (or a small group of funds) essentially cornering the market. A traditionalist could say this was market manipulation and transparently illegal.”