Originally published March 11 2015
Food truck company overvalued at $25 MILLION foreshadows coming market crash
by J. D. Heyes
(NaturalNews) There are a number of signs pointing to an impending economic crisis of a global nature, as we have been reporting for months, but perhaps none so poignant and obvious as a $25 million truck that produces -- wait for it -- grilled cheese sandwiches.
As noted by Zero Hedge and as elaborated upon further SHTFPlan.com, the truck seems grossly overvalued but not necessarily out of place in today's topsy-turvy finance world.
Zero Hedge prefaced its post thusly:
The problem is that in an environment of ubiquitous government manipulation, markets can trade at whatever levels central bankers want them to trade at, for a period at least.
So we're not going to be rash enough to call a market top; we'll merely draw attention to some anecdotal evidence of a certain, how shall we put it, irrational exuberance at work in the US stock market.
Acknowledging that markets are permitted their "petty indiscretions," such indiscretions nevertheless appear to be "piling up."
The site points to a Bloomberg View piece (here) whose author, regular columnist and market observer Barry Ritholtz, discusses "signs of excess and froth" in equity markets.
"$25 million trucks"
One case in point: Grilled Cheese Truck, Inc., shares of which began being offered and traded on Wall Street in recent days.
"Let's look at the fundamentals of the Ft. Lauderdale, Florida-based company," Ritholtz wrote. "Based on the 18 million shares outstanding and a recent stock price of $6 the company has a market value of about $108 million. No matter how much you like grilled cheese -- and I like a good GAC BAC TOM [Grilled American Cheese with Bacon and Tomato] as much as the next guy -- I can't see this as a reasonable valuation."
Why? A visit to the company's website reveals, "The company currently operates and licenses grilled cheese food trucks in the Los Angeles, CA area and Phoenix, AZ and is expanding into additional markets with the goal of becoming the largest operator in the gourmet grilled cheese space."
But, wrote Ritholtz, a read of the company's financial statements (here) reveals "it has about $1 million of assets and almost $3 million in liabilities."
Further, "in the third quarter of 2014, it had sales of almost $1 million, on which it had a net loss of more than $900,000. The story is much the same for the first nine months of the year: $2.6 million in sales and a loss of $4.4 million," wrote Ritholtz.
"Panic rush for the exits"
Never mind the company's losses for a moment. Let's just make "the generous assumption" that the company is going to post $4 million worth of sales this year. That would still mean that its shares are trading at more than 25 times its annual sales figure, "a very rich valuation," Ritholtz observed.
"Which brings me back to my original comments regarding looking for contrary indicators to my bullish posture," he said. "I can't think of a more interesting sign of the old irrational exuberance in equity markets than a publicly traded grilled cheese truck (four in this case) business trading at a $100-million-plus valuation. That sort of thing doesn't happen unless there is significant excess in the markets."
Observes Mac Slavo over at SHTFPlan.com, too much market excess is not really a good thing:
There are most certainly some deals to be had in the stock market these days, especially as it relates to assets like gold and silver, but we're not convinced that grilled cheese trucks selling at valuations of roughly $25 million a pop are the way to go.
If you play the market that's all well and good, but as Zero Hedge notes, "enjoy the party, but dance near the door," because when the party is over there's going to be a panic-laden rush for the exits.
Sources:
http://www.zerohedge.com
http://www.shtfplan.com
http://www.bloombergview.com
http://www.thegrilledcheesetruck.com
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