Everyone Loves the $100M Deli
bloomberg.com
bloomberg.com
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?
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.
Look at this ramp starting March 28th, prior to the announcement:
It's popular in the crypto world especially for NFTs where you just need to have a few wallets to trade assets amongst.
> 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?
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?
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.
Much like everything in finance there is a gatekeeper, and they seek to extract every dollar they can.
https://www.ctaplan.com/publicdocs/ctaplan/notifications/tra...
but where do these data services get their data from? Does the exchange itself sell this data wholesale?
some crypto exchanges also sell order flow but they don't really need to, as its far more profitable to front run their own users, whose entire account activity including sidelines and account balance transfers, is completely exposed to exchange insiders, who can trade against it. "oh look, whale user #4457 just transferred $100k of $COIN into their account. I wonder what they plan to do next?"
Try a cryptocurrency instead. It's all the rage right now...
https://www.google.com/maps/place/Your+Hometown+Deli/@39.839...
Street view: 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.
"Warren Buffet" eats at the buffet.
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.
I gather it's quite different in the US though. (A 'deli' there being probably culturay Jewish? Whereas to me it's just a place that sells.. I don't know, cheese, olives, oily antipasti, anything it wants really just with an emphasis on fresh and nice and prepared or preserved in some way. Greek or Italian if anything, rather than Jewish.) Honestly the Street View photos someone posted look like a sandwich bar in a war zone!
As for a delicatessen shop, there are surely some not actually attached to grocery stores, but, for example, I'm unable to convince google maps to show me any in a region of 2MM+ people (in the [US] South) no matter which term I use containing "deli". If I needed to find one I'd probably search for "butcher", "grocer", or "market", and Google Maps confirms this is a good start for finding the right kind of store.
Stand-alone delicatessens here tend to be only barely 'a restaurant' (even then more 'only barely a café', really) with one or two tables for two. They sell cheeses, biscuits, olives, other antipasti, pickles, perhaps some select nice sandwiches or bruschetta, etc. Some sell probably higher margin items like boxed teas, coffees, and biscuits, related merchandise like cafetières, cotton bags, and tea strainers.
They are decidedly not 'diner' type venues, the place linked on Google Maps would be called a café in the UK.
(To be clear I'm not saying anything's right or wrong, just that it's interesting, terminology, and something that's very loosely the same but also really different.)
E.G. https://www.bloomberg.com/news/features/2019-03-08/the-gazil...
When I think Deli, it's usually something like this place [1]: http://firesideplainview.com/deliNsandwhiches.asp
Sandwiches, cold cuts, salads, drinks and some catering.
[1]Looks like it's really into Italian tropes with the Mussolini and Godfather sandwiches.
> 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.
Unlike most of bloomberg, it is not paywalled at all.
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.
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.
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.
Ymmv, if you have a good adviser then great. But I used to work in this area, and even in my first real job (not my first job in the industry though) the level of ignorance was brutally obvious.
For example, my first employer was a single adviser firm that just got acquired for $5m...this guy didn't know how to use Excel, he didn't know how to build a financial forecast, he didn't understand that life expectancy at birth was different to expectancy at retirement, he didn't understand basic elements of finance (for example, why you can't make money buying a stock and selling after they pay a dividend), he didn't understand how to compute returns, and falsified those numbers in marketing when they showed bad performance...and this is a guy who has hundreds of clients, and $100m+ in assets. However bad you think it is, it is much much worse.
Most of the people on here will do better if they apply a little time, and understand that human reasoning is flawed (i.e. don't get swept in the hot new thing). That is all that is required.
A return to March 2020 would be a loss of close to 50%.
Previous peak to present might be a less misleading factoid. And that is +20%. Still a big number but less impressive. It may be that confidence in public markets was bolstered by the resilience of the big companies' profits in the face of the virus.
Ok you want a longer period? it’s up nearly 70% from start of 2019, and it’s PE ratio is among the highest in its history.
For what it's worth, a look at the annualized returns chart for the S&P500 might be interesting. https://www.macrotrends.net/2526/sp-500-historical-annual-re... Those green bars on the right don't look tremendously out of place compared to past years. What's really different from previous decades is not the rate of growth but the lack of financial market downturns. Hard to say if that means we're ramping up to "the big one" or if we have fundamentally figured out how to better run the economy so that we have fewer downturns.
"This time, it's different." No it's not.
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
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.
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.
"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."
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".
> People occasionally conflate these shell-company reverse mergers with the current boom in special purpose acquisition companies, but they are really very different. A SPAC goes public and raises money specifically for the purpose of taking a private company public; it sells shares to the public and then has a public vote with a lot of disclosure to complete its merger. A reverse merger generally involves a public shell of a more or less defunct operating company (or at least one that pretended to have operations); the shell will be fairly closely held by a few insiders, and there will be no real money inside it. It is not a high-profile way to go public and raise money, the way a SPAC is; it’s a low-profile way to sneak into the public markets.
Wouldn’t surprise me if they have another run at it considering how many new retail investors there are today and the froth in the market
It's probably because I'm re-watching the Sopranos but sounds like a more fun answer than pump and dump would be a front company. Dirty cash -> sandwich -> corp money -> consulting corp money. In that fantasy would be weird to not report more revenue. Plus added opportunity to flip the corp into a merger like the article says which sounds more likely.
Though the SEC probably won't like a takeover with a RICO indictee as owner ;)
>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.
> 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.
"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."
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-...
Matt Levine has been at Bloomberg since 2013.
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.
On the bank's balance sheet, a deposit is a liability. In fact, it's a short-term liability, since most deposits can be withdrawn on short notice. A bank's central business is to borrow short (from depositors) and lend long (to individuals and businesses).
> most deposits can be withdrawn on short notice.
Except for the fact that person A deposits $X in the bank and person B has $X withdrawn, nothing physical happens. It's just an offset on the books and enables them to keep very low cash reserves.
"As of March 2020, the minimum reserve requirement for all deposit institutions was abolished, or more technically, fixed to zero percent of eligible deposits. The Board previously mandated a zero reserve requirement for banks with eligible deposits up to $16 million, 3% for banks up to $122.3 million, and 10% thereafter. The removal of reserve requirements followed the Federal Reserve's shift to an "ample-reserves" system, in which the Federal Reserve Banks pay member banks interest on reserves that they keep in excess of the required amount." [1]
He writes like that because he's part of the system. It's so entrenched it's all self preservation and tons of money influencing the media to say what they want them to say. But it's hard to parse because the experts that are feeding seemingly sensible info are former Goldman Sachs or similar.
Jim Cramer bragged about how he manipulated stock prices at a hedge fund and if he was short you can't "foment", on your own, an impression that a stock is down but you do it anyway because "the SEC doesn't understand it". You trick the "moron longs" and "spread a rumor on Apple because the writers want that story and Apple isn't going to comment on it". "this is what's really going on in the market that you really don't see". "what's important when you're in that hedge fund is to not do anything remotely truthful because the truth is so against your view that it's important to create a new truth". It's absurd. [1] And this guy is still on a major network with major influence.
If you are looking at that Archegos situation objectively, you would say clearly - that's fucked up for them to do with other people's money. Not Levine.
Yet when "normal" people risk their own money on something he disagrees with, he's writing a big diatribe about how ridiculous it is. When banks play with their money, nothing to see here people. They might have been doing a rational move.
Or in this article "yes credit suisse did two bad things" and "Still it is strange to characterize this as primarily securities fraud against the shareholders, to think that the problem here was lying."
Just characterize it as securities fraud secondarily I guess Matt?
I like his insight into the system but he does way too much early PR damage control and apologies for the embedded players and not enough objective commentary. But again, he writes for Bloomberg and is former Goldman Sachs.
He literally worked at Goldman Sachs, and he mentions this frequently, especially when poking fun at his former employers.
If I ever get round to a blog I'll post it on here.