The rising price of shares, art that uses so-called non-fungible drawing technology and bitcoin has led some market observers to warn investors becoming irrationally exuberant, increasing the risk of an accident.
Exhibit A, according to one prominent investor: A New Jersey sandwich shop with a single store, meager sales and a market value of just over $ 100 million. Hedge fund manager David Einhorn, who announced Lehman Brothers ahead of the 2008 crash, wrote in a quarterly letter to customers this week that the scratchy market value of the sandwich shop, Your Hometown Deli, is the latest sign investors are getting. disconnect.
“From a traditional perspective, the market is broken and it is possible to break completely,” Einhorn wrote.
He added: “Small investors sucked into these situations are likely to suffer in the end, but the regulators – who are supposed to protect investors – do not appear to be present or curious.”
Hometown International, which despite its name owns a single restaurant in Paulsboro, New Jersey, sold $ 14,000 last year. That was a drop of nearly $ 22,000 the previous year. Despite its modest business, the deli, which has been publicly traded since 2019, has risen nearly 300% in the past year to nearly $ 14. This has recently given the company a market value – derived from the addition of all its shares – of nearly $ 120 million.
Thanks to Google Earth
The company has no full-time employees. Hometown CEO Paul Morina is also the company’s chief financial officer and treasurer. Separately, he is also the full-time principal of Paulsboro High School, as well as the wrestling coach of the school.
A call to the number listed in a Hometown financial file was not returned. A message left at Paulsboro High School for Morina was not returned.
Shares of Hometown fell 3% to $ 13 on Friday when Einhorn’s letter was circulated – still well above the share price of a deli operator of about $ 4 a year ago.
“Strange things”
In his letter, in which Einhorn also predicts rising inflation and warns of growing national debt, the hedge fund manager said Hometown is just one example of what he sees as a growing breach between stock prices and financial reality.
“Strange things happen to all kinds of stocks,” Einhorn said. “Last year, on one day in June, the shares of about a dozen bankrupt companies nearly doubled in size.”
Market skeptics see other signs of a possible bubble. One of the most notable came earlier this year when the the shares of the video game chain GameStop soared more than 2 000% in less than a month. This gave the troubled retailer, which has not made a profit for years, a market capitalization of $ 30 billion. A number of other struggling stocks, such as film chain AMC and software maker Blackberry, have also pushed up, probably by members of a Reddit message group in what became known as the “meme stock” trek.
A further indication that, according to some Wall Street analysts, there may be foam in the market, investors have taken up the offers of ‘special acquisition companies’, or SPACs, in recent years. The corporate structures are often referred to as ‘blank-check’ companies because they sell shares to investors before the company owns a business, with the promise that corporate executives will use the money from the sale of shares to make acquisitions. This type of investment, once considered risky, was suddenly accepted by investors.
More recently, commentators have pointed to rising prices of digital artworks sold as bitcoin-like NFTs as the latest sign of a potential bubble. Earlier this year, a relatively unknown digital artist, Beeple, sold an NFT for $ 69 million, exceeding the price of such well-known artists as Picasso or Andy Warhol.
Bitcoins themselves have also skyrocketed and recently rose above $ 60,000 for the first time. The digital currency traded just over $ 6,000 per bitcoin a year ago.