To get rid of some of the toxic debt, Steve Saleen issued himself more stock, covering his A$$ at the expense of SLNN shareholders. When I made my initial investment, there were aprox. 140,000,000 shares outstanding today its closer to 1,500,000,000 if the super voting stock is included. Steve did not get rid of the toxic debt, the shareholders absorbed it with the dilution of their stock. The stockholders bared all the burden, we essentially just lost 90% of our equity, Steve Saleen didn't, he just issued himself back his majority stake.
If you go back and read the original GTA note, Steve Saleen is on both sides of the transaction. The note is between (Steve Saleen, the CEO of SLNN) and (Steve Saleen and GTA). Steve Saleen essentially just transferred all of the SLNN IP to himself and his new partner GTA in the case of the SLNN default. The second note at first seems like a better deal, but is it. In this deal not only is the IP potentially transferred in the case of default, it is, and already has been transferred to (Steve Saleen and GTA) along with all manufacturing and marketing rights for the entire Asian market. Keep in mind that the Asian market is the largest and fastest growing automobile market in the world.
OK granted the SLNN shareholders and SLNN debentures holders are entitled to royalties from the Asian market. The amount and terms of this royalty agreement have not been disclosed to the investors, so as it stands the information disclosed to the investors is worthless. Lets look at it like this, just suppose a neighbor makes an offer to your child, the offer "I'll pay you money to paint my house". At what age does a child develop the logic needed to ask well, "how much money are you going to pay me". The Neighbor responds "I'm going to pay you a lot of money" In the securities industry this is known as "fairy tale logic" without knowing the terms of compensation an investor can not make an informed decision on the merits of an offer.
Another angle to be considered is, if SLNN goes bankrupt all SLNN shareholder equity will be canceled. All of the royalty payments will continue to go to the debenture holders, until the debts are satisfied. At that point SLNN can issue new share and resume operations as a new entity. This royalties scheme is brilliant, as it will continue to pay the debt even after bankruptcy and Steve Saleen retains his IP. The royalties agreement resolves any issue the debenture holders have in regards to first liens against any of SLNN assets, and which would have null and voided the first note thus preventing (Steve Saleen and GTA) from retaining SLNN's IP. Contracts are written in such away that they must be interpreted by very skilled attorneys. This royalties deal was put together by very skilled businessmen with motives that most likely differ from those that would benefit the shareholders. A shareholder would be making a big mistake to assume that this royalties agreement, was even written with the intention of representing the SLNN shareholders interest. Remember the devil is in the details.
OK, there's still a chance, that the royalties agreement is a great deal for the SLNN investors. maybe its for 5% on gross sales and SMI has already secured 6 billion dollars in sales of in the Asian market. And there's still a chance that the annual report will show an astounding turn around of SLNN corporation. But without knowing the terms of the royalty agreement we're left in the dark until the Annual Report comes out next week. GLTA
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