Premier Exhibitions: The Controversy Continues

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 |  About: Premier Exhibitions, Inc. (PRXI)
by: Jon Heller, CFA

Update: July 15 - In our last post regarding Premier Exhibitions, we reported that Sellers Capital had recently increased their stake to 10.84%. On 7/10, the day prior to the release of this piece, Sellers Capital filed a new 13D/A, reporting a 15% stake in Premier.

Premier Exhibtitions (NASDAQ:PRXI) can't seem to steer clear of controversy these days. A few months back, the issue was the source for bodies used within the company's "Bodies...The Exhibition" show (see our March 29th post). Now it's a generally disappointing quarter, and a shareholder calling for action.

Premier shares fell 17% on Wednesday following a less than stellar earnings release. For the quarter, Premier lost 912K, vs net income of $3.26 million for the same period last year. Revenue increased 34% to $15.2 million, but this was well below estimates, and not nearly sufficient to offset increased expenses.

Costs of goods sold rose dramatically, namely exhibition costs, which more than doubled from $3.06 million to $6.36 million. SG&A more than tripled from $2.54 million to $8.02 million. On the revenue side, management blamed the shortfall on the fact that 13 of the company's 22 exhibits moved during the quarter, which resulted in the loss of 330 "revenue-producing days". Be that as it may, this has led one shareholder to call for change.

Bill Vlahos of Odyssey Value Advisors LLC fired off a letter to the board calling for the sale of the company, or at least the sale of the Titanic assets Premier owns. Vlahos complained of bloated management compensation, and a strategy that is fraught with too much risk. While we can't determine Odyssey's current stake in Premier, reaction to Vlahos' letter sent shares up 12% yesterday, to $3.8.

While we are also extremely disappointed with Premier's performance both operationally and from an investment perspective (shares are down 33% since May, and 78% since this time last year), we don't think that now is the time for the sale of the company. While the Titanic assets alone may be worth several times current market cap, a sale at this point would be a sale into weakness. We don't believe that these assets would fetch anywhere near their true value (if they could indeed be sold) given the state of the economy.

We've noted that Seller's Capital continues to gobble up Premier shares, having purchased another 1.19 million recently, and now owns 10.84% of the company. We'll continue to add to our position as well as opportunities present themselves.

Disclosure: The author has a position in Premier Exhibitions (PRXI).