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A Titanic Verdict

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August 16, 2010 – Comments (5) | RELATED TICKERS: PRXI

 

A company called Premier Exhibitions (PRXI) has been on value investors' radars for quite a while now. I have never invested in the company because I find its body exhibit completely disgusting ;). I try to leave morality out of investing, as one can see by my investment in Philip Morris International (PM), but something about a company that makes money by exploiting the dead bodies of poor Chinese people and prisoners creeps me out.

I kid, somewhat, though that aspect of Premier completely turns me off I probably would be willing to invest in it if it was a screaming buy. 

Not surprisingly, PRXI is up over ten percent today after the Titanic verdict, both literally and figuratively HAHAHAH (OK, I know that was bad).

Titanic salvage company wins award from Va. court 

One doesn't realize just how big this is until they look at the numbers.  If Premier really ends up getting $110 million for these artifacts, divided by 46.81 million shares outstanding that comes out to a whopping $2.35/share.  That may not sound like a "whopping number" but it is when you consider that even after today's big gain PRXI's only trading at $1.76/share.

I wonder what's holding the stock back here?  Yes, PRXI is earnings and cash flow negative, but it doesn't have much debt.  If we add the $110 million to the $10.339 million "Cash And Cash Equivalents" and $3.308 million in "Short Term Investments" and subtract out the $5.518 in "Accounts Payable" and $6.585 in "other liabilities" we have a stock that should be worth a bare minimum of $2.38/share without even taking into account any of its hard assets that would be part of its book value.

I suppose that one major variable here is whether the Titanic assets are really worth $110 million.  I wonder who's estimate that is?

Hmmm, the body exhibits still disgust me, but I'm going to take a flier on this one in CAPS.

Deej

5 Comments – Post Your Own

#1) On August 16, 2010 at 4:51 PM, TMFDeej (99.24) wrote:

Additional information:

In addition to this recently awarded set of artifacts, PRXI already owned a smaller group of Titanic artifacts that was valued at $40 million+ many years ago.  This was not taken into account during my above calculation.

Adding to the value of these artifacts is the fact that April 2012 is the 100th anniversary of the Titanic's sinking.  

I suppose that the risk here is that Premier is awarded all of these artifacts and just sits on them rather than monetizing them.  Which I believe is a real possibility.  If that is indeed what happens, then we're left with a money-burning exhibition company that runs shows at a time that consumers aren't looking to spend much money.

If anything, this is at least a very interesting situation to follow. 

Deej 

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#2) On August 16, 2010 at 5:18 PM, MyunderratedLife (91.20) wrote:

They will probably display them -so it's not going to be realized value...

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#3) On August 16, 2010 at 5:27 PM, SultanOfSwing (96.91) wrote:

Deej,

True, but due to the ruling, they now sit on a huge pile of assets ($140+M) that they can sell off at will, if and when they so choose.

This reminds me of another wreck salvage company, Odyssey Marine Exploration (Ticker: OMEX), whose battle for ownership of the contents of a Spanish galleon containing some 500,000 silver coins is now working its way through appeals court.  See article.  The ship's name is (ready for this?) "The Black Swan"!

If they do win the appeal, it would be a game changer for OMEX as well, I think.  More drama on the high seas!

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#4) On August 16, 2010 at 5:56 PM, tfirst (25.42) wrote:

I've been doing antiques and collectibles for a long time and these things go up and down in value, just as fads do. The things that bring decent money now, I wouldn't have touched 10 years ago, and the stuff that brought good 10 years ago, can be bought today for half the price. Sure Titanic stuff may bring good now., that will change after the shows. People loose interest and then sell off their items. Titanic collectable items don't bring anymore than let's say William McKinley stuff. Another thing, museum items really have no value. Once they hit the museum, they,ve already earned the money they're going to.  It's during the item's trip to the museum where the earning potential is. I got this grillled cheese sandwich that the face of Christ appeared upon, does that mean I'm worth 40k?

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#5) On August 16, 2010 at 6:03 PM, SultanOfSwing (96.91) wrote:

tfirst,

You're right.  I should've added to my first sentence, the caveat: "as long as the appraised value holds".  Which, as you point out, may be only as long as collectors' interest holds.

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