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Hometown International — the New Jersey company valued at more than $100 million on the stock market despite running just a single deli — is in fact a shell company that’s part of a complex, international reverse-merger plan, according to a report.
Peter Coker Jr., the Asia-based chairman and recently appointed CEO of Hometown, approached a Hong Kong hedge fund called Maso Capital Partners in early 2020 about using Hometown as a shell company for a reverse merger, according to the New York Times Magazine.
Reverse mergers allow a private company to go public by merging with a firm that’s already listed on a public market and essentially take the place of the pre-existing “shell.”
The process has been criticized for, among other matters, allowing companies to bypass the intense scrutiny and disclosure requirements of a traditional initial public offering.
In this case, the idea reportedly was to use Hometown’s listing on the over-the-counter US markets to give a foreign company access to American capital by merging with Hometown.
Manoj Jain, an alumnus of Credit Suisse and co-chief investment officer of the Hong Kong-based hedge fund Maso, confirmed to the Times that the firm still plans to execute a merger with Hometown.
“We took the opportunity to invest in Hometown at a reasonable valuation, with the ability to assist in its acquisition strategy using our extensive network of private companies,” Jain is quoted as saying.
It’s unclear exactly when Maso made its initial investment in Hometown, which the Times pegged at $2.5 million, but the stock price of the company was much lower at the beginning of 2020 and only began to rise in the spring and through the summer.
Jain added that he plans to find a target company that wants to merge with Hometown for under $500 million, according to the Times. The target would then take Hometown over, acquiring a greater than 51 percent share.
“The name changes, the ticker changes, the board changes, the management changes, everything changes as the target company enters the U.S. capital market,” Jain explained.
But all that doesn’t answer the question of Hometown’s bizarre valuation of nearly $100 million despite it losing cash and doing just over $35,000 in sales over the past two years combined.
When asked to comment on the suspicious trading activity that pushed the firm’s valuation to eyebrow-raising heights last year, Jain told the Times, “Maso Capital has no knowledge on the buying or selling in HWIN.”
HWIN is the stock ticker that Hometown International uses.
Jain noted that Maso has not traded any of its shares in the company since its initial investment.
A former Securities and Exchange Commission staffer speculated to the Times that the run-up in Hometown’s valuation could be part of a long-term plan to “uplist,” or move the stock from the over-the-counter markets, in which buyers and sellers deal directly with one another, to an exchange like the NYSE or Nasdaq, which are centralized.
Market capitalization is one criteria exchanges consider when deciding to list companies. Listing on an exchange would make it easier for shareholders to trade stock in the company.
The Times noted, though, that Hometown faced various other barriers to finding its way to a major exchange, if that was the goal.
Representatives for Maso and Hometown did not return The Post’s request for comment.
The latest development comes weeks after Hometown International first drew scrutiny when hedge fund manager David Einhorn pointed out the company’s bizarre market capitalization.
Einhorn used the publicly traded company, which is listed on the over-the-counter market, as a warning sign for investors in a letter to clients.
Einhorn noted that the company had reached that eye-popping valuation despite reporting total sales of less than $37,000 over the past two years and was closed for nearly half of 2020 due to pandemic restrictions.
“The pastrami must be amazing,” Einhorn wrote in April.
Later that month, the management of Hometown International disavowed the company’s valuation, according to SEC filings.
“Management is aware of no basis to support the company’s stock price, based upon its revenue or assets,” the company said in an April 30 statement.
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