Your deli in your hometown in Paulsboro, NJ
The $ 100 million company, which owns a deli in New Jersey, was struck off an over-the-counter market platform due to “irregularities” in its stock disclosure, according to the firm that booted the mysterious deli.
OTC Markets Group executives told CNBC Thursday that they are currently looking into filings from a second company – E-Waste – a Shell company that has multiple affiliations with deli owner Hometown International.
Like Hometown International, E-Waste has an incredibly high market cap despite having little or no significant business operations.
Hometown International’s market cap has exceeded $ 100 million, despite having owned only one delicatessen store in Paulsboro, New Jersey, which had combined sales of less than $ 37,000 for the past two years.
Hometown International, trading under the symbol HWIN, was branded “buyers, beware” on Wednesday night when OTC Markets Group referred it to Pink, a less respected over-the-counter platform.
Cromwell Coulson, CEO of OTC Markets, said in a tweet on Wednesday that Hometown International’s downgrade and warning label was due to “public concern concerns” – and to “failure to comply with the rules”.
OTC Markets officials would not say Thursday whether they have reached out to the Securities and Exchange Commission, which regulates publicly traded companies, about their concerns about Hometown International.
However, OTC Markets General Counsel Dan Zinn noted that any suspension or action the company takes against any of the 11,000 companies trading on its over-the-counter market platforms “is publicly available, according to the SEC and FINRA [the regulator of broker-dealers] has access to all of these. “
“We often have a lot of back and forth with the SEC,” Zinn said in an interview. “We do it a lot and we usually do it behind the scenes.”
The SEC did not immediately respond to a request for comment from CNBC.
Hometown International officials have not returned requests for comment.
Hometown deli in Paulsboro, NJ
By Wednesday evening, Hometown International was listed on the OTCQB market, the trading platform dubbed “The Venture Market” by the OTC Markets Group.
Hometown International has been downgraded to Pink or “The Open Market”. This is where stocks go if they don’t qualify for OTCQB or OTCQX, which is referred to as “The Best Market” under OTC Markets.
Hometown International was scrutinized by OTC Markets after hedge fund manager David Einhorn cited the company as a cautious example for retail investors given its extremely high valuation with no significant delicatessen sales.
“The pastrami must be amazing,” said Einhorn of the shop across the Delaware River from Philadelphia.
In fact, the deli has won raves for its Sicilian and Italian hoagies from several curious customers, including Pete Genovese, a food critic for the New Jersey newspaper Star-Ledger. However, there is no pastrami on the menu.
Einhorn had also noted that the company’s CEO is a school principal, Paul Morina, who is also the head coach of Paulsboro’s hugely successful high school wrestling team.
OTC Markets’ interest in Hometown International was further fueled by CNBC articles detailing government sanctions against the accountants, the first attorney, and a former law firm’s broker linked to the company’s chairman’s father. These articles also listed criminal convictions of those associated with the company, as well as legal issues related to the chairman’s father.
Jason Paltrowitz, executive vice president of business services at OTC Markets, said “the simple matter of it being a deli deal with an obscene rating” isn’t why the company was delisted.
“What we were concerned with here, however, were the things that were being publicly announced,” added Paltrowitz. “There were irregularities in what was publicly available … if you dug deeper into the files.”
“It wasn’t just that it was a highly valued deli. It happens,” he said. “But that’s what caused the review.”
When asked about the nature of the irregularities OTC Markets discovered in Hometown International’s filing, Zinn said, “We’re not going to get hyper-specific about any company.”
According to OTC Markets, Hometown International may not apply again to be listed on OTCQB for at least 90 days.
“The” Caveat Emptor “designation will remain in place until the OTC Markets Group believes that there is no longer any public interest,” OTC Markets said.
This label includes a “skull” symbol next to a stock’s trading symbol “to inform investors that there may be a need for additional care and thorough due diligence before making an investment decision in this security,” the company policy states .
E-waste in the spotlight
Hours before OTC Markets delisted Hometown International from the OTCQB, a CNBC article described E-Waste’s links to the deli owner.
E-Waste’s stock, which trades on the Pink Market, costs more than $ 8 per share. That leaves the company with a market cap of more than $ 80 million despite having no ongoing business.
As with Hometown International, E-Waste’s shares have typically traded in very small amounts on a daily basis compared to the millions of shares any company has in circulation.
According to SEC filings, Hometown International loaned $ 150,000 to E-Waste late last year. Global Equity Ltd., a Hong Kong company, is the largest shareholder in both companies. Each company also has advisory agreements with a North Carolina company led by Peter Coker Sr., father of the chairman of Hometown International.
The companies also use the same New York law firm for filing applications. The North Carolina office of Coker Sr. is used as the mailing address for e-waste.
E-Waste’s CEO is John Rollo, a Grammy Award-winning sound engineer and producer and former operations vice president of a switch and sensor manufacturer in New Jersey. More recently, he worked as a patient truck in a hospital in northern New Jersey.
Rollo has not returned any requests for comments. Neither did Coker Sr.
Paltrowitz of OTC Markets said there is no “Caveat Emptor” label on E-Waste.
But he also said that the company’s status in the pink market is being “checked”. It is traded under the ticker symbol EWST.
Zinn said OTC Markets has limited power over the stocks on its exchanges, other than being relegated to less prestigious markets or posted with a warning label.
“We don’t have the power to say that the symbol will be revoked,” said Zinn.
Only the SEC has that power, he added.