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https://twitter.com/HindenburgRes/status/1735743118018765038
Maison Solutions is a company that took 6 California Asian-themed grocery stores public on the Nasdaq in October. The company also owns a 10% equity interest in a Dai Cheong Trading, a distribution company owned by $MSS controlling holder, Chairman and CEO, John Xu.
$MSS went public on 10/5/2023 at $4 per share with a valuation of $69M and closed the same day at $8.96, essentially doubling in value within hours of the IPO. As of yesterday it had a market cap over $265M.
$MSS is a loss-making business in dire financial straits. Grocery stores typically have razor thin margins of between 1% to 3%. For the quarter ended July 31, 2023, $MSS posted $13.8 million in revenue and a loss from operations of ($216,745).
As of July 31, 2023, $MSS had just $1.61 million in cash and total current assets of $6.70 million vs. $8.14 million of current liabilities & loans of $2.8 million. As of July 31, 2023, MSS was in violation of its debt service coverage ratio covenant on its bank loan.
In further signs of distress, an apparently undisclosed federal tax lien totaling $80,053 was filed on Maison International Inc. in July 2022 for prior tax periods. According to UCC records as of Dec. 15th, there are no updates that would indicate the lien has been paid off.
Grocery stores often trade at P/S of well under 0.5x. Ex: $VLGEA operates 34 supermarkets and trades at ~0.15x sales. $NGVC is a regional chain based in Colorado that trades at ~0.33x sales. $MSS trades at ~4.63x sales. At a 0.5x multiple it would trade at $1.58, 90% downside.
Pre-IPO, $MSS acquired stakes in 2 supermarkets from the wife of the CEO, valued at $2.5m and $410k respectively. We estimate the combined total value of the company's assets to be less than $15 million. Beyond valuation, we found multiple red flags with $MSS.
In $MSS IPO prospectus, Chairman, CEO and key holder John Xu is also listed as President of J&C International Group, LLC, "a cross-border investment firm" since 2013. J&C's website says it "support[s] immigration services for high-net-worth Chinese investors and institutions".
$MSS CFO Alexandria Lopez is also listed as former CFO at J&C International. Her bio lists 10 years of financial and accounting experience, all at J&C International. She received her B.A. in Accounting from the University of Phoenix, an online university.
J&C International, $MSS CEO John Xu and related entity Hong Kong Supermarkets were named as defendants in 2020 litigation alleging they used supermarkets as a front to defraud the EB-5 visa program.
The plaintiff alleged that J&C International took a $500k investment in Hong Kong Supermarket from him to help him get his Visa. He alleged that $MSS CEO John Xu and J&C forged his Visa application, and listed him as a fake employee of a supermarket location now owned by $MSS.
The plaintiff alleged that when he asked for copies of his visa application, he was threatened with retaliation by J&C and John Xu. The court found in favor of the plaintiff, and defendants lost an appeal. The case is currently being scheduled for trial.
In a separate lawsuit from 2018, a plaintiff alleged that J&C and $MSS CEO John Xu engaged in a scheme to loot his company and turn it into an illegal visa mill.
We also believe that that MSS' recently appointed centralized vendor, XHJC Holding Inc., is an undisclosed related party. The principal address for XHJC Holding Inc is a Japanese restaurant that is associated with $MSS CEO John Xu.
The mailing address we found for XHJC Holding on State of California corporate documents is the same as J&C International.
$MSS's underwriter, Joseph Stone Capital, has 7 disclosures on its FINRA BrokerCheck page, including 4 regulatory matters and three arbitration cases. One described "knowingly providing substantial assistance to salespeople conducting fraudulent and unethical sales practices."
$MSS is the only priced IPO that Joseph Stone Capital participated in for 2023. In 2021, Joseph Stone was the underwriter for $EJH. Shares spiked as high as $16.60 shortly after the IPO and now trade at a spilt adjusted price of $0.041.
In 2022 Joseph Stone was the sole underwriter for Visionary Education Technology Holdings Group Inc, now trading as $GV. The IPO was priced at $4 per share and shares now trade for $0.12 cents.
$MSS's prospectus auditor was Friedman LLP, previously charged by the SEC over failure to detect fraud at another Asian supermarket chain, iFresh. iFresh was delisted & now trades at $0.0006 on the OTC pink sheets. One of MSS' stores, in El Monte, was once an iFresh location.
Our investigation also revealed that $MSS is being pumped by WhatsApp chat rooms, in similar fashion to what we saw with a similar China-based pump and dump, $GDHG, which crashed ~90% in one day of trading last week. The chatroom dialogues were nearly identical.
On Nov. 22 2023 Maison closed a private placement of 1,190,476 shares of its common stock at $4.20 per share to 2 foreign individuals. One purchase was for 892,857 shares, representing 5.12% of the total outstanding shares and the largest holding outside of the CEO.
The closing price on the day was $10.87, giving these unnamed buyers an instant 61% discount on shares they turned around and registered for re-sale one week later. The Prospectus filing for sale of these shares was filed on December 11th.
We believe $MSS is slated to suffer a similar fate to $GDHG and that retail shareholders will once again be left holding the bag on a massively overvalued company that has become bloated in size due to illegal and nefarious pumping/manipulation. We are short $MSS.
Posted In: MSS
