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Actionable news in RAVE: RAVE RESTAURANT GROUP Inc,

Are RAVE Shorts About To Get A Pie Five In The Face?

We believe short sellers of RAVE (NASDAQ: RAVE) could soon be hit in the face with investor realization of the true value of Pie Five that is being obscured by its status as a division inside of RAVE Restaurant Group. RAVE is the sole owner of the rapidly growing fast casual pizza chain Pie Five in addition to the recently reinvigorated but mature chain of buffet and carryout restaurants called Pizza Inn. RAVE's stock is up about 20% since the beginning of the year, but the stock had been trading over $15 per share several months ago for a 100%+ gain year to date before the recent spate of selling brought the shares back down to $8 range again. We believe that some of this selling may have been the result of investors cutting back on restaurant sector exposure generally and some portion could have been due to disappointment with the company's most recent earnings report (for the Q and Y ending June 28, 2015). But we think investors should take note that a fairly significant portion of the selling has been by short sellers, as the reported short interest has risen to very high levels for such a thinly traded stock while the number of "days to cover" needed is now at the highest in RAVE history at 14. We emphasized "reported" there because a number of commentators on the trading of RAVE stock have indicated that there appears to be a very significant number of naked short trades each day for the last few months and some suggestions that the actual short interest may be considerably higher than what has been reported. Regardless whether such assertions are accurate or not, the reported short interest seems extremely high to us in light of three factors that could cause the shares to move higher in a fairly short time frame -

1) the recognition by investors that Pie Five is now in ultra high growth mode and executing superbly

2) recognition by investors of the value of Pie Five as a standalone when competitors like Blaze Pizza file to go public

3) recognition by investors of the value of Pie Five as a standalone if RAVE management does an IPO to sell a portion of Pie Five in a spin out transaction that allows Pie Five to have stock that is valued solely on its performance and growth prospects.

1) Pie Five is now in high growth mode, opening new restaurants at a rapid pace that may cause the number of stores open at year end to be more than triple (expecting 90+) the number of stores open at the beginning of the year (31). This will have a huge impact on revenue, but that impact will be most seen in the back half of the company's Q1 (the quarter that just ended Sept. 30) and Q2 (the quarter ending Dec. 31, 2015) forward, as the greater impact of the corporate...


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