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Everyone Loves the $100M Deli
- EMM_386 6y agoSo essentially, I get together with my friends take a random business public. We agree on the number of shares, and then we keep trading the stock among each other, carefully moving up the price. "I'll pay $10", "ok, I'll pay $10.50", "I'm in at $11". When this gets to a $100 million market cap by doing this, we land a story online about this crazy, useless business that's worth $100 million. It captures the imagination of hoards of new-found meme stock, one-tap-away, YOLO crowd and suddenly, it has volume. Thanks to this new found volume, I can easily cash out my shares to all the suckers buying this at $13. Am I seeing this right?
- titanomachy 6y agoRight, although taking the deli public apparently cost them in the low six figures, so pretty risky if the meme gods don't smile on you that day.
- tesseract 6y agoA lack of liquidity (a.k.a. shallow order book) will likely make itself apparent at some point. Just because you have 10 million shares and people bidding $10 for a marginal share, doesn't necessarily mean you would be able to find a willing buyer(s) for the whole company at $100M.
- legitster 6y agoThe idea that there would be a bunch of suckers to bail you out on the other side definitely shouldn't/wouldn't have been expected.
- ChainOfFools 6y agothis is the standard playbook for every cryptocurrency ICO since around 2013 (which IIRC is before the term ICO was even around). I'm sure it's no different for NFTs, which function rather like a single-coin ICO. the only twist is that with crypto its possible to run this shell game much faster and with far less transparency thanks to pseudononymous accounts and the overall infrastructural obscurity that early stage crypotocoins enjoy, coupled with the near immediate price signal propagation possible in a purely virtual marketplace. coinmarketcap owes its entire existence to its incredibly effective utility as a synthetic demand amplifier for extremely shallow, closely held token markets. edit: forgot to add that when promoters need their own FOMO plant in the financial/tech media, one that talks up the amazing crypto-futurist potential of their new coin, a common payola tactic was to send the target journo a wallet preloaded with a "few coins to play around with, just to see how it works." Then simply sit back and let them figure out for themselves how to turn a routine $500 story assignment into an easy, practically untraceable $5k cash out. wash, rinse, repeat with a new ICO next month.
- EMM_386 6y agoI'm very curious about the recent Signal announcement that they are "choosing" Mobilecoin for the payments. Mobilecoin being directly tied to the creator of Signal. Look at this ramp starting March 28th, prior to the announcement: https://coinmarketcap.com/currencies/mobilecoin/ https://coinmarketcap.com/currencies/mobilecoin/
- alister 6y ago> "I'll pay $10", "ok, I'll pay $10.50", "I'm in at $11". When this gets to a $100 million market cap... Where I can see a list of all the individual trades that got the company to a $100M valuation? I'd like to see how it actually got bid up. To be very clear, I'm looking for every single trade (Mr. X sold 62 shares to Mr. Y for $10.50 on April 7, 2021 at 10:52 am) going back to the beginning of the company. With or without the actual identities of Mr. X and Mr. Y. I expect that the answer is that no such list is publically available. But why not? I can understand a privacy argument about Mr. X and Y's names, but why aren't all the individual trades public information for a public company?
- jldugger 6y agoBecause the "smart money" investors don't want to be discriminated against in the market and they are big enough market participants that they write the rules. If we did put a name attached to every trade, it'd become clear when someone is breaking up a big order into many small ones to avoid 'disrupting the market price' -- that is, getting a good price for at least some of their sale. Or buy order, I suppose.
- ddeck 6y agoThe trades themselves (time and sales) are available to paid subscribers of various data services, but not identities. Only insiders/significant holders are required to disclose their identity. A search for "historical tick data" will yield plenty of results. Much like everything in finance there is a gatekeeper, and they seek to extract every dollar they can. https://www.ctaplan.com/index https://www.ctaplan.com/index https://www.ctaplan.com/publicdocs/ctaplan/notifications/trader-update/Schedule%20Of%20Market%20Data%20Charges%20-%20January%201,%202015.pdf https://www.ctaplan.com/publicdocs/ctaplan/notifications/tra...
- chii 6y ago> various data services but where do these data services get their data from? Does the exchange itself sell this data wholesale?
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- BenoitEssiambre 6y agoIt's called painting the tape. https://www.investopedia.com/terms/p/paintingthetape.asp https://www.investopedia.com/terms/p/paintingthetape.asp It's popular in the crypto world especially for NFTs where you just need to have a few wallets to trade assets amongst.
- foolmeonce 6y agoThanks, a key take away for me was: > Painting the tape is an illegal activity and prohibited by the SEC because it creates an artificial price. So it sounds clearly illegal and fully under SEC jurisdiction in the deli stock case, but what about the crypto market cases? Can the SEC go after other/foreign market cases for people under US jurisdiction or SEC regulated entities participating in painting the tape in blockchain markets or international markets?
- lmm 6y agoNot a complete answer but: the SEC has jurisdiction over securities, which the overwhelming majority of crypto tokens seem likely to be.
- anonu 6y agoIt's a bit harder to do with s publicly traded company, because you have to file paperwork and there's some other overhead. Try a cryptocurrency instead. It's all the rage right now...
- Clewza313 6y agoYes, and you've just described a classic pump-and-dump scheme and the "painting the tape" tactics used for the pump. https://en.wikipedia.org/wiki/Pump_and_dump https://en.wikipedia.org/wiki/Pump_and_dump https://en.wikipedia.org/wiki/Market_manipulation#Runs https://en.wikipedia.org/wiki/Market_manipulation#Runs
- whatever1 6y agoAnd you can do this by trading back and forth just 1 share. From the valuation of that one share we extrapolate the market cap. Isn't this amazing?
- gandalfian 6y agoExcept if we transact shares privately it doesn't show up in the market. If we offer to buy shares on the market we don't get to chose who we buy them from and we can't offer to overpay for a share, we randomly get shares from whoever offers them the cheapest. Clearly people manage to pump and dump but I suspect it's a little more complex/expensive/risky than two friends swapping shares...
- EugeneG 6y agoIt’s not a deli, it’s an alternative to fiat!
- reader_mode 6y agoIt's obvious everything is going to be running on it down the line.
- tw112358 6y agoI'd love to see this analysis of luminar
- mcculley 6y agoWhat do you think is wrong with Luminar?
- ibeckermayer 6y agoWhat's purportedly up with them?
- nslice 6y agoThis isn't just a deli. This is a financial engineering firm.
- jonny_eh 6y agoThe news that Hertz's shares are no longer expected to go to zero is also incredible.
- valuearb 6y agoBe careful about buying it. I haven't had time to read the PACER filings, but the Bloomberg/WSJ articles indicate the shareholders will have to ante up some money to keep their shares. And only if the latest offer wins the auction.
- sk5t 6y agoWhat flavor of fraud might this OTC malarkey be propping up?
- tyingq 6y agoThe key bit seems to be this: "If you are a company — particularly a Chinese company — that would like to be publicly traded in the U.S., but that would prefer to avoid the scrutiny that comes with an initial public offering, doing a “reverse merger” — acquiring the empty shell of a near-defunct but public U.S. company — is often an easy way to do it."
- okareaman 6y agoThis can't be a new idea. Why is it making news now?
- ac29 6y agoBecause this particular company is funnier than a typical shell company.
- okareaman 6y agoI found a comapany selling "clean" shell corporations. Yes, they're boring: http://interlistcapital.com/Services/BuyAPublicShell http://interlistcapital.com/Services/BuyAPublicShell
- tyingq 6y agoMaybe the sort of brashness of being honest that's it's a tiny deli with sketchy paid wages, miniscule revenues, etc.
- bombcar 6y agoBecause talking about it made a bunch of people buy it. It's like posting about how some scamcoin is a scam and so people run out to buy the scamcoin. Though it's probably more like "$15 on a meme stock is nothing".
- zwieback 6y agoI get that fraudsters are defrauding suckers but how will that lead to a market crash, aren't normal stockholders holding stocks of normal companies? I could see a bubble deflating but wouldn't your typical stock go back to what it was a few months ago vs. going to be half its value?
- 002445 6y agoMany stocks would actually lose half their value if they go back to their value from a few months ago.
- hogFeast 6y agoA simple way to think about this: everyone in society has a portfolio of assets, they allocate to that portfolio based on risk/return/liquidity/etc, and the most important ratio here is cash to assets. At this stage in the cycle, perceived risk is very low, expected returns are very high (some of the stuff you read on this is next-level crazy, ppl saying they are guaranteed a double digit real return from equities), and so no-one wants to hold cash...any cash. They hold very low levels of cash relative to total assets. At some point, this will change. Cash % of assets is basically stationary (to some extent, the mean % has probably trended down this decade slightly though). Large-scale fraud will lead to a re-examination of the relative reward of assets, actual losses mean that your ratio of cash to assets drops, and people sell to either increase liquidity/panic/etc. Bubbles sometimes deflate slowly, most often they do not because people aren't rational. If you buy into a stock expecting to sell it someone else at a greater price, what do you do if you wake up one morning and it is down 20%? You get out. There is no reason to hold it. You can't earn fundamental value at that price. This is happening in multiple stocks, margin calls, brokers start liquidating client portfolios en masse...you get the picture.
- zwieback 6y agoOk, so I have to hope that the guys managing my 401K act more rationally, e.g. slower to jump on these stocks and slower to get out of mainstream assets. I guess that's not guaranteed but I would hope they know better than to invest in this deli.
- sxates 6y agoWould someone call Michael Lewis and make sure he's looking into this story?
- benatkin 6y agoI keep seeing it described as "a New Jersey deli". Here in this article "rural New Jersey". It's a 15 minute drive from South Philadelphia and across the Delaware from the Philadelphia airport. I don't think it's as charming as people are imagining it. Less Garden State and more Superfund Site.
- tyingq 6y agoGoogle maps entry with photos, menu, etc: https://www.google.com/maps/place/Your+Hometown+Deli/@39.8397368,-75.2388817,3a,75y,90t/data=!3m8!1e2!3m6!1sAF1QipMzsZUbd7HQwEXlNiteqybScI5OUQAaOrW5kWM!2e10!3e12!6shttps:%2F%2Flh5.googleusercontent.com%2Fp%2FAF1QipMzsZUbd7HQwEXlNiteqybScI5OUQAaOrW5kWM%3Dw152-h86-k-no!7i3264!8i1836!4m5!3m4!1s0x89c6db50586ca83d:0x8e4b297eb1fc4014!8m2!3d39.8400804!4d-75.2390864 https://www.google.com/maps/place/Your+Hometown+Deli/@39.839... Street view: https://www.google.com/maps/@39.8401111,-75.239345,3a,90y,102.32h,86.03t/data=!3m7!1e1!3m5!1s8pFRbExfSWEepYiudhMoGA!2e0!6shttps:%2F%2Fstreetviewpixels-pa.googleapis.com%2Fv1%2Fthumbnail%3Fpanoid%3D8pFRbExfSWEepYiudhMoGA%26cb_client%3Dmaps_sv.tactile.gps%26w%3D203%26h%3D100%26yaw%3D86.93351%26pitch%3D0%26thumbfov%3D100!7i16384!8i8192 https://www.google.com/maps/@39.8401111,-75.239345,3a,90y,10... No pastrami on the menu, even though it's a NJ Deli. Hmm.
- benatkin 6y agoI think I'd rather eat at McDonald's than this place. Warren Buffet has the right idea going to the McDonald's drive thru.
- fortran77 6y ago"Buffett" "Warren Buffet" eats at the buffet.
- oh_sigh 6y agoI'd associate pastrami more with NY Jewish delis than NJ delis. Actually, being from NJ, I didn't even know "NJ delis" were a thing, besides for Wawa. I'm going to just include delis that are in hoboken/newark/the rest of the NJ-side of the NY metro region as NY delis. The closet thing I think we have are hoagie shops, but those aren't particularly special apart from the fact that we call them hoagies and not subs or even just sandwiches.
- throwastrike 6y agoAnd still regulators will not step in. And still the Fed will pump money both announced and unannounced. The financial world is a complete joke. Makes complete sense that Elon Musk is pumping dogecoins.
- legitster 6y agoMake sure you read down to that awesome anecdote about "mosaic theory" how large investors profit off of private meetings with executives even though sharing "material information" is illegal. > On the other hand, it is clear that the Aberdeen analyst got useful information out of this meeting. The analyst paid close attention to the discussion of the chairman’s spa trip and charity polo match, and got a strong and accurate sell signal from that discussion. Surely the most useful information in the meeting came from the guy’s tan. If you describe an executive as “unfeasibly tanned” in a research note, you have definitely decided to sell. Here, that was the right call.
- np_tedious 6y agoLevine is so good. If you enjoy this stuff, I'd recommend signing up for his newsletter (picture exactly this link's contents in an email). Unlike most of bloomberg, it is not paywalled at all.
- mycologos 6y agoI agree that Levine's writing is way funnier than "financial newsletter" would lead you to believe, but I actually unsubscribed this week after trying it for a couple of months. Problem was, I'd just read the whole week's newsletters every Saturday morning, and I always came away kind of depressed at how how much energy people devote to venality.
- legitster 6y agoAgreed. Top on my daily reading list.
- BucketsMcG 6y agoWell I'm delighted to see that if their takings are anything to go by, our speciality grocery shop that we opened exactly six months ago must be worth $60-70m. Time to sell up and retire stinking rich!
- mycologos 6y agoAre you writing about this specialty grocery shop anywhere? I'd really like to read an account of the process of opening and operating something like that.
- BucketsMcG 6y agoNot at the moment, too busy doing it :) But it's oft crossed my mind I should be writing about it, it's been an interesting ride. We're trying to bootstrap it in a lean way, with pretty tiny amounts of capital. If I ever get round to a blog I'll post it on here.
- jonahbenton 6y agoMint some NFTs while you're at it. They won't last!
- garmaine 6y agoI’m a simple man: I see “Matt Levine” on the byline, and I read it.
- html5web 6y agoReminder: Joke coin became hotter than bitcoin
- html5web 6y agoThe total value of the dogecoins in circulation is nearly $50 billion — not bad for a digital currency that started as a joke.
- oh_sigh 6y agoIf I mint 50,000,000,000 OhSighCoins, give away all but one for free("Airdrop"), and trade one for $1, that is not really a good indication that there are $50B in OhSighCoins circulating.
- seoaeu 6y agoOf course not, OhSighCoins are surely worth at least $2 each!
- manquer 6y agoLast 24hours DogeCoin had trading volume of $40Billion so perhaps not a good comparison ?
- asdfasgasdgasdg 6y agoDepends on how many people were involved in the trading. To pick a contrived example, suppose the only two transactions on the ledger were me buying 1e-9 dogecoins for $1, then you and me swapping forty dogecoins. That situation would match the circumstances you described. Kinda what this article is about actually.
- ChainOfFools 6y agoon what basis should anyone believe such a ludicrous number represents legitimate skin-in-game volume and not a handful of fee-free bots trading SQL queries back and forth without ever touching a fiat ramp? none of these self-reported volume numbers should be considered remotely realistic. exchanges have every incentive to cook their metrics in favor of "volume" to draw in fresh meat.
- miohtama 6y agoWhat Matt often misses that regulations are not there to prevent stupid investments, they are there to prevent fraud and insider trading. If you want to lose your money by buying $100m deli there should be nothing in the world to stop you losing money that way.
- selectiveshift 6y agoIf you are talking about >Small investors who get sucked into these situations are likely to be harmed eventually, yet the regulators – who are supposed to be protecting investors – appear to be neither present nor curious. then you are incorrectly attributing that to Matt. It was a quote from Einhorn’s Greenlight Capital.
- iudqnolq 6y agoYou make an interesting argument about what should be, but are wrong in describing what currently is. The people in charge of those regulations consider this their purpose > Our focus on Main Street investors reflects the fact that American households ... > The federal securities laws we oversee are based on a simple and straightforward concept: everyone should be treated fairly and have access to certain facts about investments and those who sell them. For example, you're required to pass varying levels of quizzes on financial knowledge to be allowed to trade different sorts of things. The goal of this is to protect naive investors from being taken advantage of.
- exclusiv 6y agoExactly. Enter "accredited investors".
- hchz 6y agoThis is a myopic take on both Levine's writing and the external impact that stupidity can have on other market participants, positioned in entirely different assets.
- boomboomsubban 6y agoEveryone will soon come to hate this story as ten businesses in their hometown try to recreate it, and it will eventually lead to evening news stories about how some lawyer convinced a local favorite to go public and they're now facing foreclosure.
- manquer 6y agoThe intent was not to meme I think, it costed the deli owners quite a bit,in the low six figures to go public? They probably wanted to flip it for a reverse merger. Don't think that many businesses have the connections or need to create a flip like this for some Chinese company.
- kbenson 6y agoHalfway though I was thinking "this sounds quite a bit like Matt Levine's writing", then looked and realized it was. I had forgotten he moved orgs.
- psanford 6y ago> I had forgotten he moved orgs. Matt Levine has been at Bloomberg since 2013.
- kbenson 6y agoI only read random things of his that get posted here, or sometimes when people link to older articles of his that are particularly interesting, and I've been doing it that way since before 2013, IIRC. It's not that I read a lot of his stuff, it's that he has a few very well known and widespread articles which I have read and he has a very distinctive style. Specifically, it was when I got to the Hertz section and he said "That said, you should never listen to me and I know nothing." That's a hallmark of all the Matt Levine articles I can remember reading.
- exclusiv 6y agoI like some of this stuff, but he's part of the system and you can tell from his writing. The system that gets off on having information disparity between the powers and the people. Very little value added at all but much extracted. Bloomberg terminal subscriptions with $20k+/year licenses as one small example. The equivalent of an Oracle to many on here and the licensing most despise but for some reason nobody questions this guy? Or Bloomberg/CNBC/similiar in general? Or anyone peddling any financial stuff? Would we just trust a big co enterprise salesperson that's been around the block? No we wouldn't. Anyway, he said of Archegos before: "But one thing I want to say about the banks is that if you were one of Hwang’s prime brokers and you had perfect information — about how big he was and how concentrated, about how many banks were financing him, about his effect on stock prices, about Viacom’s stock offering, etc. — you might still rationally do this trade, if you were confident you could get out first." You'd have to be part of the system to make a statement like that. Banks take deposits and list them as assets. And then get risky with that money they have relatively low cash reserves for. And when they screw up, it costs them less than what they gained. It's ridiculous. The financial engineers' version of rational is reckless.
- bkyan 6y agoSo, it's essentially a SPAC that happens to have a deli attached?
- TMWNN 6y agoYes. Specifically, a SPAC that, as Levine said, seems designed to be used by a Chinese company looking to go public on a US equity market.
- a_bonobo 6y ago>People were like “yes, $100 million deli, absolutely, I want to buy that.” Hometown went from a thinly traded pink-sheet deli that nobody had heard of, to a company that everyone had heard of exclusively because it was a poster child for market excess, and … people … bought … it? What are the chances that bots parsing financial news happened to pull out the stock code and auto-bought stock which was then sold manually? How often does this happen? In which case there were no people to buy it
- superfrank 6y ago> What are the chances that bots parsing financial news happened to pull out the stock code and auto-bought stock which was then sold manually My guess would be almost 0 in this case. I'm sure there are cases where bots have been fooled in the past and bought themselves into bad situations, but prior to this story breaking, this stock was only trading a couple hundred shares a day. Trying to algo trade a stock with almost no liquidity seems like a recipe for disaster so I would think many bots would ignore the stock on volume alone. I really believe it's just people who want to be part of the story and are buying into the novelty.
- fortran77 6y agoHe's a public school teacher, so he has gold-plated health benefits, and a guaranteed pension. He's set for life. Why not take outrageous bets? He has nothing to lose!
- nn3 6y agoOkay so why is their payroll so low if it's a real deli? Dodgy accounting? Or maybe the coach does all the work for free?
- kumarski 6y agoIt's a stock whose financiers are in Hong Kong and Macau. Think about the rise in this no-name company with respect to the following laws and you'll all have more clarity on what actually went down. - HR2513 - Illicit Cash Act - Equitable Act "Chinese Communist Party currently controls more than US$30 Trillion of Western Financial Assets scattered around the globe outside of mainland China. This war chest continues to grow at roughly $40 Billion a month. " http://www.deepthroatipo.com/the-stealth-nationalization-of-americas-banks-an-economic-whodunit-thriller-novella/ http://www.deepthroatipo.com/the-stealth-nationalization-of-...
- imtringued 6y agoIf they deployed the "war chest" they would end up creating jobs for Americans. The act of building up the "war chest" is the war.
- EVa5I7bHFq9mnYK 6y agoWait, I can show you a $600B textile factory.
- shp0ngle 6y agoThis craziness in "meme stocks" and cryptocurrencies cannot go forever. "This time, it's different." No it's not.
- blatchcorn 6y agoWho said it's different?
- gandalfian 6y agoQuote from artical "David Einhorn warned people not to invest in Hometown International, even though it had never occurred to them to invest in Hometown International, but once they were warned not to they absolutely did."
- grumple 6y agoIt will take this deli 6,250 years to make $100 million dollars at their current rate of income. For reference, 6,250 years ago was before the first known civilizations in Sumer and Egypt. In another 6,250, humanity will likely be completely unrecognizable, and it's highly unlikely that the US or dollars still exist.
- jokethrowaway 6y agoThis kind of behaviour makes me think the bubble is almost ready