LMP Automotive Holdings Inc. plans to terminate seven pending purchases of many auto dealerships due to an inability to secure financial commitments.
"The company intends to terminate all of its pending acquisitions in accordance with the terms of their respective acquisition agreements, primarily due to the inability to secure financial commitments and close within the time frames set forth in such agreements," LMP CEO Samer Tawfik said in a statement.
LMP reported in a news release that its board of directors believes its stock price is undervalued. LMP shares closed at $6.65 on Feb. 15 and plunged 21%to $5.25 when the market closed Wednesday.
A year ago, LMP shares traded for over $20.
The stock was part of LMP's strategy to offset the cost of some of its pending acquisitions.
"Given the record M&A activity in our sector and multiples being paid for these transactions, LMP's board of directors has directed management to immediately pursue strategic alternatives, including a potential sale of the company," Tawfik said in the statement.
Automotive News has reported that a seller in one planned deal kept a $1.5 million deposit after that deal fell through on Jan. 31.
In 2021, LMP acquired its first franchised dealerships. The company also entered several contracts to buy more. LMP never had the capital base to pursue acquisitions as aggressively as they were, said Sheldon Sandler, CEO of Bel Air Partners, a buy-sell advisory firm in Hopewell, N.J.
Sandler notes companies should demonstrate to investors that they’re growing but must make sure they have the necessary capital to support that growth.
“LMP never had access to the capital to sustain their growth,” he said. “Their cash flow was inadequate to cover the cost of their growth.”
The affected pending purchases include:
- 85% stake in Central Avenue Chrysler-Jeep-Dodge-Ram in Yonkers, N.Y.
- Tom Peacock Cadillac and Tom Peacock Nissan in Houston
- Kia of East Hartford in Connecticut
- Zappone Chrysler-Jeep-Dodge-Ram in Clifton Park, N.Y.
- Chantz Scott Chrysler-Dodge-Jeep-Ram in Greeneville, Tenn.
- Yonkers Kia in New York
- 85% stake in 10 new-vehicle dealerships in Florida, a used-car center and a fleet operations outlet from the Alan Jay Automotive Network