The owner of a single New Jersey deli boasts a $105 million market cap - despite making only $14,000 in sales last year
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- A New Jersey deli owner's stock has tripled in the past year, valuing it at $105 million.
- Hometown International's total sales were $36,000 over the past two years.
- "The pastrami must be amazing," investor David Einhorn joked this week.
- See more stories on Insider's business page.
A New Jersey deli owner on the brink of bankruptcy has inexplicably tripled in value over the past 12 months. Its market capitalization now stands at $105 million, or about 7,500 times its sales last year.
Hometown International runs a single store, Your Hometown Deli, in Paulsboro - a borough that's home to around 6,000 people. Its menu ranges from meatball sandwiches and cold cuts, to hash browns and onion rings.
The company has generated only $36,000 in sales over the past two years, has no full-time employees, and doesn't pay its president or director. Yet its stock price has surged from below $2 to $13.50 in under 18 months.
Hedge fund manager David Einhorn highlighted Hometown in a letter to investors this week. The Greenlight Capital boss noted the company's tiny scale, paltry revenues, heady market value, and the fact that its largest shareholder is also its CEO, CFO, treasurer, one of its directors, and the local high school's wrestling coach.
"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.
Hometown's bosses weren't optimistic about the deli's future either in their latest annual report.
"Besides the equipment, fixtures, and inventories we purchased for our deli store, we have limited assets," they said. "We had minimal working capital as of the date of this annual report and used cash in operating activities for the year then ended."
"These factors raise substantial doubt about our ability to continue as a going concern," they added. "If we are not successful in expanding our Your Hometown Deli concept, or finding a business to merge with, we may need to cease our operations, which would result in our shareholders losing their entire investment in us."
Hometown's recent stock gain is particularly striking, as the COVID-19 pandemic shuttered the deli for six months last year, its annual report shows. The company's costs also ballooned to $640,000, largely reflecting consulting and professional fees tied to a share sale. As a result, its losses nearly quintupled year-on-year to north of $620,000.
Notably, Hometown boasted $1.4 million of cash at the end of 2020, thanks to a share sale last April that generated $2.5 million of proceeds. That's a huge figure given the company estimates it has about 60 shareholders in total.
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