R.J. Reynolds Descendant Bets on Bankrupt Crumbs Cupcake ChainMiles Weiss
A great-grandson of R.J. Reynolds Tobacco Co.’s founder bought a stake in Crumbs Bake Shop Inc., betting that he and other shareholders will receive a piece of the cupcake chain once it emerges from bankruptcy.
W. Noah Reynolds, a former certified public accountant who lives in Winston-Salem, North Carolina, acquired a 6.3 percent stake in Crumbs through the purchase of 800,000 common shares, according to a filing yesterday with the U.S. Securities and Exchange Commission.
Marcus Lemonis, the star of the CNBC reality show “The Profit,” has formed a joint venture with Fischer Enterprises LLC to provide financing and ultimately acquire the assets of Crumbs, a New York-based chain that went public three years ago as cupcake specialty stores peaked in popularity. Reynolds, who now invests in real estate and teaches as an adjunct instructor at the University of North Carolina at Greensboro, said that Lemonis will probably preserve some value for existing shareholders in the reorganized company.
“I am banking on Mr. Lemonis’s reputation,” Reynolds, 41, said in an e-mailed response to questions. “I will either own a few crumbs in the new business or be wiped out.”
Crumbs filed for bankruptcy protection earlier this month, listing assets and debts of as much as $50 million in a Chapter 11 filing in U.S. Bankruptcy Court in Newark, New Jersey. The company, known for supersized cupcakes topping out at 1,090 calories each, shut all of its stores on July 7.
Reynolds, who had been preparing a case study on Crumbs for one of his classes, said he began buying the chain’s stock after CNBC reported on July 10 that Lemonis, the chief executive officer of Camping World, was putting together an acquisition offer and financing. Company shares soared 16-fold to 48 cents that day from a closing price of 3 cents on July 9.
Reynolds said he is one of the 22 living great-grandchildren of Richard Joshua Reynolds, the founder of the tobacco company. Noah’s grandfather was R.J. Reynolds Jr., the first son of Richard Joshua Reynolds, who was born in 1850 and died in 1918.
Reynolds said he spent more than $250,000 to acquire the Crumbs stake, adding that the investment was based in part on his knowledge of Krispy Kreme Doughnuts Inc., which is headquartered in Winston-Salem.
Crumbs “is very similar to Krispy Kreme,” Reynolds said, adding that a member of the doughnut chain’s founding family was his wrestling coach in high school. “We had a sweet confection business that grew too fast and went bust.”
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