A House Of Cards?

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First off, let me get out the disclaimer that I am not a financial analyst. When I look at a company’s balance sheet, I may as well be trying to read hieroglyphics. So those that are more astute than I, are likely to tell me how misguided I am to feel the way I do about this subject.

According to the Myers-Briggs profile – I am an ISTJ. If you know anything about Myers-Briggs, you know that means I am normally a fact guy. I generally pay no attention to my gut instinct or my intuition – I base most of my thinking on cold hard facts. If the facts aren’t there, I usually don’t allow my feelings to overrule. Normally, that’s the case.

In the case of the Nashville Superspeedway, however – I’m paying more attention to my gut instinct than I am the facts.

A couple of weeks ago, I wrote about whether or not the Verizon IndyCar Series should entertain the thought of returning to the dormant Nashville Superspeedway for the first time since 2008, now that a local group was trying to buy the property. I presented pros and cons for a possible return, based on the assumption that the new ownership group was stable and that they would be successful in closing the deal. I am now wondering if there are more cons than pros.

Our local paper, The Tennessean, ran an eyebrow-raising article this past Sunday. It was an exposé on NeXovation, the company that is trying to acquire the Nashville Superspeedway; and more specifically – Robert (Robb) Sexton, the man behind NeXovation.

When I first wrote about this a couple of weeks ago, I had a few private concerns regarding the financial status of NeXovation – but I glossed over them. Although the company was based in Nashville, I had never heard of them – but that didn’t mean anything. I’m sure there are a lot of successful niche companies in the area that I’m unfamiliar with. The fact that they were only two years old was a slight concern, but I know well-established companies form new sister companies all the time.

What did concern me was the company’s unsuccessful bid for Germany’s Nürburgring. NeXovation submitted the highest bid, reported at $207 million. Yet, their bid was rejected in favor of a reported bid of $139 million by Capricorn Group – a motorsports industry supplier. Why would a bid that was $68 million lower be accepted, unless there were major concerns over the buyer’s ability to obtain the financing? While the question was prominent in my mind, I chose to gloss over it, not wanting to rain on the local celebration of the possibility of a return to racing in the Middle Tennessee area. In short, I didn’t want to be a naysayer – one of the Legions of the Miserable. But privately, I confided to a few friends that I was skeptical of this thing ever going through.

When I read Sunday’s article, it did nothing to soothe my fears. The article never came out and called Sexton a snake-oil salesman; but it certainly painted the picture of a man who boasted of a vision and big ideas, but was extremely vague when it came to elaborating on them.

Even more troubling was the question of where the money was coming from. The article named LoHi Merchant Bank, an investment bank based out of Denver, as the source of the financing. A few Google searches on my part showed nothing shady or disreputable in LoHi’s history, but with my limited knowledge of such things – I couldn’t help but wonder why or how a prudent investment firm could back such a deal to buy Nashville Superspeedway that totals more than $45 million, before any upgrades are done to the dormant property.

Maybe I’m not well-schooled in high-finance, but it puzzles me how anyone can loan this kind of money to a technology group with no product or income, in order to buy a racing facility when they have no experience at all in running such a venue. The only reason given as to why Sexton has pursued the Nürburgring or Nashville Superspeedway is that he is a car guy. He owns a Corvette and a Porsche. Seriously? I love to eat steak along with spicy shrimp cocktail. Perhaps someone will back me in trying to buy and run St. Elmo Steak House in downtown Indianapolis. I am probably about as qualified to run such a famous restaurant as NeXovation is to run a racing facility.

A couple of weeks ago, I wrote that the ownership group of NeXovation seemed solid. That was based on a quick glance of their website, which looks very impressive. Their leadership team page shows eleven respectable looking gentlemen and one woman – Sexton’s wife – as officers. Just as a sampling, I decided to Google NeXovation’s Chief Operating Officer, Gary Oberman. I found that he was also the Founder and CEO of Buildablock.com, a Montreal-based company described as an innovative e-commerce platform that combines the power of group buying, couponing, price aggregation and more. Their stock closed yesterday at a whopping and impressive three cents a share. I went no further in my investigation of the leadership team.

As I mentioned earlier, The Tennessean article points out that NeXovation has no inventory of products to sell, and no income. Sexton invented and patented a technology called Flatwire…back in 1986. Through a series of licensing agreements and subsequent lawsuits, Sexton now again finally has control of his quarter-of-a-century-old technology that he plans to be the focus of his company – and serve as the source of funding for Nashville Superspeedway.

Again, I freely admit that I am talking way outside my level of expertise. Dealings like this may be commonplace in today’s corporate world. Maybe my being so naïve has made my skepticism turn into cynicism. I don’t have all of the facts to really make a call as to whether or not this deal will go through or if Nashville Superspeedway will be on solid financial footing for years to come. That call is for banks and potential sanctioning bodies to make with many more facts at their fingertips.

But from what my gut is telling me, it seems that the entire NeXovation existence is built on a house of cards. The entire plan, or lack thereof, comes across as half-baked. I hope I’m wrong. For one reason, after writing this post – if the deal does go through and the Verizon IndyCar Series has a race here, I probably wouldn’t be granted media credentials for a race in my own hometown, which would really stink.

Beyond that selfish outlook – I would hate to see IndyCar get bitten again by a shaky race promoter. We all remember what happened when the series relied on a handshake deal to hold a race in China. I’m not sure if the series has ever been paid for racing at the Milwaukee Mile in 2009.

But besides that – I want to see Nashville Superspeedway survive and then thrive. Other than the remote location and the track surface, there is nothing wrong with the facility. It has been proven in the past that an IndyCar race is a successful draw at this track. Chances are that it will be again.

So, I’m hoping that the fact that I normally don’t pay attention to my gut instincts over facts will prove to be the right strategy again. Hopefully, I just don’t have all the facts. My gut is telling me that this group will never pull this off. I’ve never wanted to be proven more wrong in my entire life.

George Phillips

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12 Responses to “A House Of Cards?”

  1. Bent Wickerbill Says:

    It doesnt sound to me like they have much of a chance to put the financing together. Although the current owners may sweeten the deal by lowering the price just to get it (the track and grounds) off of their books as a non earning liability…

  2. The Lapper Says:

    I would imagine that part of the plan would be to hire a track manager who understands how to operate a Super Speedway. Also, I don’t think that Lohi Merchants Bank would loan the money or even engage in talks without knowing how they would operate the facility and be presented with a credible plan. Dover had to have been green lighted by the bank that this was in the works before they made the announcement. Granted, I wasn’t a part of the discussions, but I doubt that Dover would not be able to tell if they were dealing with Otis B. Driftwood or not. I think I’ll let this play out.

  3. dzgroundedeffects Says:

    “But from what my gut is telling me, it seems that the entire NeXovation existence is built on a house of cards. The entire plan, or lack thereof, comes across as half-baked.”

    Quite honestly, you’d make a helluva banker George. I’m betting dollars to donuts you’re spot on, but that never stops habitual ‘speculators’ from taking an ill-advised risk.

  4. Ron Ford Says:

    What do NeXovation and the new Indy tenderloin have in common?: Both are bad for George’s gut feeling. Not something to be trifled with.

  5. sejarzo Says:

    George, George, George….are you sure you don’t have a healthy dose of INTJ mixed in with that ISTJ? You note that “Other than the remote location and the track surface, there is nothing wrong with the facility.” To me, it’s not a stretch to conclude frome those two facts alone that there is a LOT wrong with the facility–especially if NASCAR has proven to have no real interest in scheduling dates there. When I read that Chicago metro residents have come to think Chicagoland is “too remote” when it’s still within the metro proper, I wonder if the location of Nashville Speedway is a dealbreaker.

    • Sherman Nelson Says:

      I believe that Chicagoland is 50 miles from downtown Chicago. NSS is only 33 with a convenient drive.

  6. After reading the article in the Tennessean I can see your concerns!

    Strictly speaking about the speedway I don’t think they could get Nascar back except in a Nationwide or Truck race due to the 25,000 seat limitation. Does not sound like there is any intention of increasing that.

  7. The details are what are important and those details are not public record. There is no real reason to worry until tax payer dollars are used. If he fails, it will be no sweat of anyone’s back but his own.

  8. Ron Ford Says:

    Meyers-Briggs. ISTJ. What is this? Dr. Phil goes racing?

  9. […] of rehashing their shortcomings, of which there are many, I would direct you to read the article here. If you choose not to go back in time and read it, I’ll wrap them up in a nutshell – […]

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