Saleen Automotive Inc (OTCMKTS:SLNN) is one of the best known names in the automotive world. Many auto enthusiasts put CEO Steve Saleen in the same category as the late great Carroll Shelby. However, what's true in automotive circles is not the same in penny stock land. To say Saleen Automotive has been a disappointment as an investment is an understatement. While Steve Saleen knows how to make a car go faster, he found out the hard way what toxic debt can do to a small cap stock like SLNN. However, we're not throwing in the towel just yet. We think there is still a potential for a turnaround and why SLNN is worth looking at from an investment perspective.Saleen Automotive is an American specialty manufacturer of high performance vehicles, technical performance parts, lifestyle accessories and apparel. Founder Steve Saleen has continually set the bar for automotive design and performance engineering in both street and racing applications. Saleen plans to utilize its existing strategic partnerships and dealer network to refine its design and engineering prowess, continue development of emerging automotive technologies, and expand its presence nationwide with a combination of automotive retail services, aftermarket parts and new vehicle sales to build significant long-term value.The Saleen brand just opened its first international showroom in Shanghai, China. The showroom is located in the upscale Jing An District in Shanghai and will not only assist in broadening the Saleen experience but also furthering the brand. The opening of the Shanghai Showroom is the recent result of an agreement formed between Saleen and Saleen Motors International ("SMI"), an affiliate of GreenTech Automotive and licensee of the Saleen Brand in Asia. The store will have Saleen vehicles, parts, and accessories on the showroom floor, which will allow potential buyers to see, touch, and buy Saleen.
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Revenues were $627,187 and $2,219,177 for the three and six months ended September 30, 2015, respectively, compared to $866,524 and $2,563,901 for the three and six months ended September 30, 2014, respectively. The decrease in revenues was primarily related to lower chassis revenue, as customers opted to obtain and send to Saleen their new chassis rather than Saleen having to procure the chassis. Excluding chassis, volume of vehicles sold and sales of aftermarket retail parts increased on a year over year basis.To fund operations, Saleen negotiated a capital infusion of up to $10 million that will deliver a Black Label Mustang or its equivalent for each $1 million in new debt or preferred stock. The deal also includes up to $2 million in senior notes that pay 12 percent, and up to $8 million in preferred stock that will ultimately give the lending group 61 percent of publicly traded Saleen. While on the surface is appears to be a good deal, Cyrano Group’s David Bergstein, who’s credited with negotiating terms for SM Funding, also exacted a two-year, $25,000-a-month consulting fee for his advisory firm. This works out to $600,000 over the two years. Not cheap and not a great deal for SLNN and its shareholders.
The reality is that SLNN needs to bring in a new CEO to turn the company around. Current CEO Steve Shaleen needs to be elevated to Founder and focus on doing what he does best, and that's building great cars. He has proven that he doesn't know how to run a public company and he does not know how to negotiate funding. These are critical errors that have cost shareholders dearly as evidenced by the following chart.
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There is some good news and why we are keeping our eye on SLNN. For one, the China showroom is the first real news to come out of the company in quite some time. It could be a sign of more to come. Second, Saleen Automotive is revered across the globe. With the right game plan, marketing, strategy, and execution, SLNN could be a winner. Third, shares have been absolutely decimated. The company still has potential and really has no where else to go but up. We will be updating Insider Financial as things develop with SLNN. Be sure to sign up today and stay on top of the latest developments!Disclosure: We have no position in SLNN either long or short. We have not been compensated for this article.
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