By James Saft
(Reuters) – Creating needs among consumers is both the basis of our economy and a really risky investment strategy.
That is the message from the demise of cupcake company Crumbs Bake Shop, a (former) seller of cupcakes each of which averaged about one fourth of your daily caloric needs.
Crumbs, which not too long ago had lines out the door, said this week it was ceasing trading and would shutter all its locations.
Shares in the publicly traded bakery, which had 48 stores in 10 states, now change hands at 1 cent, down from its peak of $12.72 in 2011 shortly after it went public via a reverse merger with a publicly traded special-purpose acquisition company.
While it is easy to dismiss Crumbs as an ill-conceived business surfing the confluence of several self-limiting trends (diabetes might arguably have been mentioned as a risk factor in its SEC filings), the company is actually worth considering in a bit more detail as an illustration of how we live, invest and function as an economy now.