If ever stock market profits were on the menu, they might be served piping hot at Paulsboro, N.J.’s Your Hometown Deli.
Residents of Gloucester County in South Jersey know the small deli for its subs, bagels, and Italian dishes and the fact that it’s owned by the supremely successful Paulsboro High School wrestling coach.
But on Wall Street, the company has gained notoriety because its stock is now worth more than $100 million and has been criticized for suspicious trading and potential manipulation.
The deli started trading as Hometown International in 2019, rising from about $1.25 a share to $12.99 as of Friday’s close. The tremendous rebound in the stock market has lifted even rarely traded “microcap” stocks like Hometown International to bubbly heights.
The company’s high flying stock stands in stark contrast to its one humble deli on Mantua Avenue. Over the past two years, including a months-long shutdown during the pandemic, the company made just $35,000 in sales, according to filings. Its most recent financials show a loss of over $400,000 in the nine months ended September 2020.
In a twist, the majority owner of the public company is Paulsboro’s famed high school wrestling coach Paul Morina. He is CEO, president, and CFO, and doesn’t take a salary.
Morina was recently listed as the majority shareholder — 83% — with 31.5 million shares, then worth about $40 million at current prices.
A Paulsboro High School math teacher named Christine Lindenmuth is another director who also does not take a salary.
Calls and emails to Morina and Lindenmuth weren’t returned. A close friend of Morina also declined to comment.
Hedge fund manager David Einhorn blasted Hometown International in a letter to clients Thursday, calling its rise another sign of the market’s froth and regulators’ inability to police the market.
“The pastrami must be amazing,” Einhorn wrote.
Hometown’s annual report indicates that it was set up to create a chain of stores with “a new Delicatessen concept.”
“Its delicatessens will feature “home-style” sandwiches and other entrees in a casual friendly atmosphere.” But the chain never got built. The company’s only deli is in Paulsboro, the report says.
Much like GameStop, Hometown International has been driven by social media websites such as Reddit, where traders comment regularly on its fortunes.
What Is a microcap stock?
The term “microcap stock” applies to companies with low or “micro” capitalizations, meaning the total value of the company’s stock is less than $250 million, according to the Securities and Exchange Commission.
Microcap companies can be risky investments because they don’t trade on major exchanges. They often give out extremely limited financial information. Fraud and market manipulation are common in microcaps, experts say, because these stocks tend to trade in low volumes, and their prices can be easily manipulated.
While there’s nothing overtly illegitimate about Hometown, some experts would avoid the company because it has poor sales and big losses. It also has many days when no shares are traded or just a few hundred shares change hands, making it easier to influence the stock price.
Hometown also trades in the “over-the-counter” (OTC) market, which has fewer requirements than a national securities exchange such as the New York Stock Exchange or NASDAQ.
In a sign that Wall Street might be overheating, microcap stocks have shot up even more than the broader market.
Since last year’s pandemic, microcap stocks have risen 120%, according to the Russell Microcap benchmark index, compared with a gain of 56% from the S&P 500 index through March 31, 2021.
Who’s running the company?
The company lists Peter Coker Jr. as chairman and says he is based in Hong Kong and Macau. His father, Peter Coker Sr., is paid $15,000 a month as a consultant for Hometown, and lives in North Carolina.
Messages left with Coker Sr. were not returned, and a LinkedIn message to Coker Jr. wasn’t returned.
Morina has been the principal of Paulsboro High School since 2008, and the head wrestling coach since 1986. His annual salary as principal totals about $126,000, public records show.
He has spent his entire career in the Paulsboro Public School District where he began in 1982. While at James Madison University, he was a two-time NCAA Eastern Regional champion for wrestling, and his high school teams have won 25 class state championships, 24 district championships, and 25 conference titles.
According to his company bio: “He has a 550-34-4 overall record and has led the Paulsboro wrestling program to exceed 1,000 victories.” The report also noted he was a member of the Paulsboro Town Council from 2005 to 2011.
“We believe that Mr. Morina’s in-depth knowledge and extensive experience makes him a valuable member of our board of directors,” the filing noted.
Board director Lindenmuth has taught at Paulsboro High School since September 2012. Before that, she was a student adviser at Salem Community College from 2010 through 2012. She started her career as a math teacher in 1997.
Hometown’s shares closed Thursday at $13.50. On Friday, as news filtered out about the stock, shares dipped as low as $9.01 before rallying to close at $12.99