When the Deli’s Not Just a Deli
A market mystery recently caught the attention of financial journalists and the public more generally: a New Jersey deli that is seemingly never open and reports minimal profits is—on paper at least—worth $100 million after issuing public shares. The shareholders are few, and mostly in China. The owners are local (the revered wrestling coach) and not (a father-son investor duo with a history of shady dealings). The quality of the sandwich is TBD (but given that the company only reported $126 in annual labor costs, it’s not clear there would be anyone to make one). How exactly did this small town restaurant become a business worth nine figures? And, more importantly, why and for whose benefit?
The answers are still murky at best. Some have suggested that the deli may be a front for money laundering, a place for foreign interests to park their money in the US. Others believe that the deli is a shell corporation that some other company may merge with to become public in a backdoor way—effectively a SPAC in disguise but with even less oversight. Still, others have pointed to the lucrative “consulting contracts” with other business interests owned by the same father/son investors to suggest the deli is merely a front for siphoning off large amounts of investor cash.
Regardless of the purpose, there’s no justification for a deli making tens of thousands of dollars a year being “worth” $100 million. And, until some sort of criminal activity is proven, there seems to be little that regulators can do under the current legal regime to stop this. Whether this points to a hole in the regulatory regime may depend on your perspective. And as some commenters have pointed out, until the public became bemused by this story, few if any retail investors were investing in the company, and thus the general public was not suffering much, if any, direct harm from whatever shenanigans are going on.
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