$100 Million New Jersey Deli Is Representative of Nothing
The nature of “bulletin board” stocks is that they often trade far above fair value no matter what part of the market cycle we’re in, not because of broad excesses.
Bloomberg, April 20, 2021
By now, you surely have heard about the small deli in New Jersey that happens to be a publicly traded company with a market value of about $100 million. The resulting commentary has focused on how this is a sign of out-of-control markets that, as hedge fund manager David Einhorn of Greenlight Capital wrote in a letter to clients, is “fractured and possibly in the process of breaking completely.”
While the example of Hometown International Inc. seems outrageous, it doesn’t take much effort to show that it really doesn’t prove anything about the current state of markets. The reality is that so-called bulletin board stocks often trade far above fair value no matter what part of the market cycle we’re in, and is not a sign markets are broken. Nor is it proof of investor irrational exuberance or evidence that the regulators have gone AWOL.
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I originally published this at Bloomberg, April 20, 2021. All of my Bloomberg columns can be found here and here.
NEW YORK, NY – AUGUST 29: In this photo illustration, a pastrami on rye sandwich is displayed in Katz’s Deli on August 29, 2014 in New York City. The iconic New York deli recently sold the air rights to above their building, potentially allowing developers to build on top of it. (Photo by Andrew Burton/Getty Images)
