A hedge fund pointed out the ridiculousness of a New Jersey deli trading at a $100 million valuation. Now the newly minted meme stock is popping as trading volumes explode.
- A New Jersey deli with a $100 million valuation flew under the radar until Greenlight Capital's David Einhorn pointed to the company as a sign of excess in his quarterly letter.
- Prior to Einhorn's letter, Hometown International was a rarely traded stock on the over the counter exchange.
- But with increased attention from Einhorn's letter, trading volume in Hometown International is surging, only adding to the absurdity that Einhorn was trying to emphasize.
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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.
Einhorn's spotlight on Hometown International didn't deter the type of risky trading behavior that's been seen in GameStop and Dogecoin this year, instead it exacerbated it.