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Sell/Short IFresh Inc: Wildly Overvalued With 80% Downside

|About: iFresh Inc. (IFMK)
Summary

IFMK is 5x overvalued at 40x ebitda vs. peers ~8x. Stock worth ~$4.0 at peer valuation.

Recent Chinese reverse merger of small East Coast grocery business.

Potential offering on the horizon serves as a catalyst.

Background:

iFresh Inc. (NASDAQ:IFMK) owns 8 Chinese grocery stores on the East Coast and recently debuted on the Nasdaq via reverse merger with the SPAC ECAC. I have shopped at the stores in New York, and while they are well trafficked, they are essentially glorified corner stores: small and dingy with poor service.

Source: Yelp, 128 Mott, NY Location

Source: Yelp, 128 Mott, NY Location

Crazy valuation:

40x ebitda versus peers ~8x

Per store valuation (they don't own real estate) of ~$40mm versus $2.5mm private market valuations and $1.5mm capital cost.

I think shares are worth ~$4.0, which at 8x ebtida, is still a generous $8mm per store.

Pump and dump:

No arms length institutional money came into the SPAC before its acquisition of IFMK. I believe insiders are orchestrating a pump and dump that will eventually leave the public owners holding the bag.

We wrote about FAB Universal (NYSEMKT:FU) a couple years ago, and the stock was delisted shortly afterward.

My broker shows tens of thousands of shares available to short at a modest borrow cost. I caution that while we are certain the valuation is unjustified by the fundamentals, insiders own most of the shares and can manipulate the stock in the short run.

Potential catalyst:

Given the valuation, large insider ownership, and acquisition pipeline, I would not be surprised to see a large secondary or primary offering in the coming months.

From the company's investor presentation:From the company

Disclosure: I am/we are short IFMK.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.