by Dan Hartman

Last September, I wrote in my From the Hip column about the Excelsior-Henderson motorcycles and the fact that they promised us production bikes in the fourth quarter of 1998. I asked if you remembered the song “Mrs. Robinson”, by Simon and Garfunkel. There’s a line that goes, “Where have you gone, Joe DiMaggio?” Well I still have that same line running through my mind. I have seen no production motorcycles coming off the line in Belle Plaine, Minnesota as yet.

Then on April 6th the Star-Tribune ran an article in the Business Section of the paper about Excelsior-Henderson and the fact that there still was no production. The song came back to me. The company reported a net loss for their 1998 fourth quarter of $8.13 million. It was also reported that in 1999 Excelsior-Henderson anticipated greater losses than expected and that they needed more cash perhaps more than $10 million to move into production at this time.

The company said that vendor problems led to the production delays. Analysts estimated that Excelsior-Henderson will lose $14 million to $20 million in 1999, more than double earlier estimates. The company stock, which sold in February for $10.75 per share, fell to less than $6.00 per share with the news. I must admit I was not too surprised by the article. Startup companies often have cash flow problems. Under capitalization is not uncommon for a startup company either. Excelsior-Henderson is not unusual in that they are under capitalized at this point in time. Vendor problems would be a good reason to have cash flow problems.

After I read the article in the Star-Tribune, I called my broker to talk about the stock price and whether it was still a good buy in the market. He thought that if you could hold onto the stock for a while (a few years) and if the motorcycle goes into production in 1999, the stock should go back up. He wasn’t sure how high it would go, but that’s the risk an investor takes. Who knows what will happen, but it sounds logical. If you had money to lose, it could be a good investment. Don’t take my word for it, call your broker.



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