🍋 The $100 Million Deli

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Short Squeez
September 27, 2022

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 "Life is like riding a bicycle. To keep your balance, you must keep moving." — Albert Einstein

Good Morning! The S&P fell to 3,655 yesterday, marking a new low for 2022. The British pound got further pounded, with many analysts now predicting dollar flipping the pound before year-end. (Time for a sneaky trip across the pond?) Home prices have been falling as well, with a Fed study finding that remote work attributed to over 60% of housing price & rent surge during the pandemic.

Plant-based meat is suffering an identity crisis as sales decline with Deloitte reporting deteriorating perception of the industry (Beyond Meat COO biting someone's nose also probably didn't help with the PR). President Biden announced new travel rules requiring airlines to disclose all additional fees (including checked baggage) upfront. *Spirit Airlines has left the chat*

Daloopa is giving away Rivian's detailed financial model for FREE. Download here.

1. Story of the Day: The $100 Million Deli

An infamous deli, called "Your Hometown Deli," in Paulsboro, New Jersey is on fire. Not because of any grilled cheeses or a panini press, but because three people involved with creating a $100 million public company held this deli as their only asset.

James T. Patten, Peter L. Coker Sr., and Peter L. Coker Jr were accused by federal prosecutors of artificially inflating the prices of two companies through manipulative trading. However, instead of a side of fries, they were given a charge of securities fraud as well... on the house.

Hometown International Inc. was one of the companies, whose sole asset was the awful looking deli above. David Einhorn's Greenlight Capital shed light on the company in a letter to investors in April 2021. He didn't mention the weak exterior, but he did highlight that the deli had only done $20k in sales in 2019, and less in 2020, despite a nine-figure valuation.

As an example of the irrational exuberance in the markets, Einhorn said, "The pastrami must be amazing. 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."

The trio manipulated the value of Hometown's over-the-counter shares by creating an appearance of active trading through accounts they controlled. As a result, the company's market cap reached over $100 million. Hometown had merged with a bioplastics startup Makamer holdings in March, selling the deli's inventory for a whopping $700 and the restaurant itself for $15k.

The three musketeers face as much as 20 years in prison if convicted of the most serious charges.

Short Squeez Takeaway: American ingenuity at its finest. Whenever I hear stories like this, I can't help but think, "You're clearly smart and creative. Why not build something the right way, instead of trying to cheat the system." In any case, when is the Netflix special coming out?

2. Markets Rundown

Equity markets fell for the fifth straight session, while crypto bucked the trend and was slightly up over the previous 24 hours.

Movers & Shakers

  • (+) Wynn Resorts ($WYNN) +12% after Macao announced it will allow Chinese tour groups back in the casinos.

  • (+) Chegg ($CHGG) +9% after Needham upgraded it from a hold to a buy.

  • (–) Vertical Aerospace ($EVTL) -20% after test flying its eVTOL model for the first time, while tethered to the ground.

Private Dealmaking

  • Not So Dark, a restaurant meal delivery startup, raised $80 million

  • SpinLaunch, a satellite launch system, raised $71 million

  • Deep Instinct, a cyberattack prevention platform, raised $62.5 million

  • Ceribell, a portable EEG headset developer, raised $50 million

  • Solfacil, a solar energy fintech startup, raised $30 million

  • PlayUp, an online betting operator, to go public at $350 million valuation

3. Top Reads

  • Private equity’s new debt ceiling (Axios)

  • Russian invasion of Ukraine to cost global economy $2.8 trillion (Fox)

  • Understanding pound's sudden crash (BB)

  • New York tops list of world’s largest financial centers (Reuters)

  • HSBC warns investors to avoid European stocks (CNBC)

  • VC funds wrestle with tech startup valuations (Axios)

  • Meet the "vertiport," where you'll go to hail an air taxi (Axios)

  • Google CEO urges employees not to equate fun with money (Fox)

  • Steve Forbes says ‘real cure’ for inflation has gone ignored (CNBC) 

  • Why market’s best hope is a ‘growth recession’ (CNN)

  • Bond sell-off worst since 1949 (Reuters)

A Message from Daloopa: Update Models with 1-click

Here's a dirty secret: part of being a finance professional consists of being one of the world's best-paid data-entry professionals.

It's a pain—and a rite of passage—to build a financial model by painstakingly transcribing information from 10-Qs, 10-Ks, presentations, and transcripts. Or, at least, it was: Daloopa uses machine learning and human validation to automatically parse financial statements and other disclosures, creating a continuously-updated, detailed, and accurate model.

Thomas Li (CEO) puts it best: “Daloopa collects literally everything a company discloses.”

Today is your lucky day because Daloopa is giving away Rivian's model to Short Squeez readers.

4. Book of the Day: Focus: The Hidden Driver of Excellence

From the author of the #1 international bestseller Emotional Intelligence, comes a groundbreaking look at today’s scarcest resource and the secret to high performance and fulfillment: attention

For more than two decades, psychologist and journalist Daniel Goleman has been scouting the leading edge of the human sciences for what’s new, surprising, and important. In Focus, he delves into the science of attention in all its varieties, presenting a long-overdue discussion of this little-noticed and underrated mental asset that matters enormously for how we navigate life.

Attention works much like a muscle: use it poorly and it can wither; work it well and it grows. In an era of unstoppable distractions, Goleman persuasively argues that now more than ever we must learn to sharpen focus if we are to contend with, let alone thrive in, a complex world. Goleman analyzes attention research as a threesome: inner, other, and outer focus. 

Goleman shows why high-performers need all three kinds of focus, as demonstrated by rich case studies from fields as diverse as competitive sports, education, the arts, and business. Those who excel rely on what Goleman calls smart practice that helps them improve habits, add new skills, and sustain excellence.

Combining cutting-edge research with practical findings, Focus reveals what distinguishes experts from amateurs and stars from average performers.

“But amid the distraction of work life, poor listening has become epidemic.”

5. Short Squeez Picks

What Else to Read: TheFutureParty Newsletter

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With every email you open, every story you read, you’re going to have the jump on the rest of the crowd. Join over 170,000 driven professionals who read the newsletter every day.

6. Daily Visual: Skytrax World Airline Awards 2022

Top 20 airlines for 2022

7. Daily Acumen: Incentives

“When good and honest people can be incentivized into crazy behavior, it’s easy to underestimate the odds of the world going off the rails.

Everything from wars to recessions to frauds to business failures and market bubbles happen more often than people think because the moral boundaries of what people are willing to do can be extended with certain incentives.

That actually goes both ways. It’s easy to underestimate how much good people can do, how talented they can become, and what they can accomplish when you view them in an environment where they haven’t yet found their proper positive incentives.

Extremes are the norm.”

Source: Collaborative Fund

8. Crypto Corner

9. Memes of the Day

 

 

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