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  • Sinkable, But Also Bankable 15 comments
    Jan 6, 2013 11:49 PM | about stocks: PRXI

    Premier Exhibitions (NASDAQ:PRXI) owns a collection of over 5,000 artifacts from the Titanic. The collection has been appraised at $189 million and has received a letter of intent (LOI) to sell the collection for that amount. Reasonable people can come to different conclusions about the relevant tax rate; however, our view is that this can be done in a tax-efficient way. We are assuming proceeds of right around $189 million or $3.94 per share. With the stock trading at $2.62, you are not paying anything for the remaining businesses.

    To learn more about Titanic artifacts, consider reading Titanic: The artifact exhibit.

    Disclosure: I am long PRXI.

    Additional disclosure: Additionally, at one point we were also looking to bid on the collection, but we are not insiders and do not have any insider information about the process. Chris DeMuth Jr is a portfolio manager at Rangeley Capital, a partnership that invests with a margin of safety by buying securities at deep discounts to their intrinsic value and unlocking that value through corporate events. In order to maximize total returns for our partners, we reserve the right to make investment decisions regarding any security without further notification except where such notification is required by law.

    Themes: Titanic Stocks: PRXI
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Comments (15)
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  • bazooooka
    , contributor
    Comments (3606) | Send Message
     
    Chris, assuming the sale falls through; how much do you value the business alone? Where would you see a worst case scenario? Maybe a 50% write down on the collection and slow growth (low single digits) in their new business model sound like a worse case to me. Would you still come up with $2+ as a floor?
    11 Jan 2013, 04:09 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (6325) | Send Message
     
    Author’s reply » I think that they will be able to get the sale done. However, if it falls through your assumptions sound reasonable to me.
    11 Jan 2013, 04:15 PM Reply Like
  • bazooooka
    , contributor
    Comments (3606) | Send Message
     
    Seeing that they are on a 10M ebidta run rate and growing top line I'd think half the market cap would be covered by the core business alone. Imagine if the sale actually goes off above the 189M value, that would certainly help offset any unexpected taxes. This one is a fun idea and it seems it might be a take private type deal down the road for the core business too.
    11 Jan 2013, 05:49 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (6325) | Send Message
     
    Author’s reply » That is my hope and expectation. Shareholders will probably encourage management to take an expeditious route down that road. Sarbanes-Oxley and other public company costs are too high for such a small company.
    11 Jan 2013, 05:55 PM Reply Like
  • Squeeky Wheel
    , contributor
    Comments (339) | Send Message
     
    I just did some digging on the Titanic sale. I think there are significant issues:

     

    The best time to sell was at the 100th anniversary auction. On 10th April, PRXI promised to release updates/winner/etc the following day. There was no release from either PRXI or the auction house - it's as if the auction was planned but never executed. That suggests to me that the reserve price was not met. Whatever PRXI needed to make the sale worth while was higher than the market is willing to pay.

     

    There are reasons to doubt the appraisal. One commenter (ie: lousy source), stated that it was based on breaking up the collection - which cannot be done. If that is the assumption of the appraisal, the actual value is lower. According to the PRXI 10Q, in August 2010 the court estimated the market value at 110million. Note also that RMST must create a 5m reserve fund, of which only 125k has been placed in. This creates a 5m liability for PRXI, or a net collection value of 105m (based on court valuation). I suspect that the 189m appraisal was made on behalf of PRXI and publicized with the hope of generating high bids - which ultimately didn't arrive. The 110(-5)m court appraisal may be more realistic.

     

    Note also, that the previous RMST president may be due a bonus up to 5m if the deal closes before April 2013. So conservatively knock off another 5m.

     

    Assuming that a sale does happen (and I'm not convinced it's likely), we're looking at 105m to 184m depending on the circumstances. At the low end that's 2.19 per share for the most valuable part of the company. Leaving 40 cents for the rest of the company.

     

    With uncertainty about the sale (why now and not earlier?), a likely lower price, and the shut down of their NYC exhibit due to Sandy, I wouldn't call this ultra safe.

     

    btw: thanks for the PPG/GGC article. Assuming the merger goes through on 28th Jan, I'll have a nice little profit.
    26 Jan 2013, 01:52 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (6325) | Send Message
     
    Author’s reply » This is a great comment and a useful caveat section for this investment idea. Also, I should probably include in the disclosure that I’m an inveterate treasure hunter, so I might be biased in favor of anything to do with submarines/shipwrecks/...
    26 Jan 2013, 08:56 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (6325) | Send Message
     
    Author’s reply » Titanic violin played by the bandmaster of the doomed ship has been found in an attic: http://bit.ly/XdEpk8
    15 Mar 2013, 05:55 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (6325) | Send Message
     
    Author’s reply » My full article on this idea will be published on Monday.
    29 Mar 2013, 07:24 PM Reply Like
  • Acme Capital
    , contributor
    Comments (73) | Send Message
     
    Appears your full article remains veiled to non-pro subscribers. Do you know of any other outlet to view your writeup? Thanks.
    6 Jun 2013, 09:51 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (6325) | Send Message
     
    Author’s reply » I don't, but the short answer is that the operations are valuable -- worth at least $0.50 per share. Also, they will probably monetize the Titanic assets, but that process is slow and uncertain.
    7 Jun 2013, 06:58 AM Reply Like
  • Special Situations and Arbs
    , contributor
    Comments (979) | Send Message
     
    Chris my thoughts on PRXI: Seems like the risk/reward is massively skewed in favor of buying here. While news was terrible on one level (faith in mgmt communication took a hit) the company's titanic assets value didn't change and the operating business is actually on a better track. Timing is unpredictable. Maybe the investment bank they hire finds them a buyer or two. PRXI wasn't really looking for quite a while as they were keeping their eggs in one basket. The market is looking at worst case scenarios now but any Math spits out a much higher valuation. Would love to know if you feel a purchase at these levels has great odds of being successful as long as one is OK with holding a while.
    Thanks
    7 Jun 2013, 08:57 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (6325) | Send Message
     
    Author’s reply » Yes. "While news was terrible on one level (faith in mgmt communication took a hit) the company's titanic assets value didn't change and the operating business is actually on a better track. Timing is unpredictable". I have nothing to add to that because it coincides with my view in every particular.
    7 Jun 2013, 09:03 AM Reply Like
  • Special Situations and Arbs
    , contributor
    Comments (979) | Send Message
     
    PRXI news of them buying back shares may have put in a bottom here. Never know of course but when you have a stock that is worth significantly less than its share price bottoms can be born. It is always scary doubling down on a 'falling rock' but I'm happy I did. In addition to the fundamentals, the chats showed 1.50 as an extremely low risk entry point.
    18 Jun 2013, 10:08 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (6325) | Send Message
     
    Author’s reply » I agree 100%. If I know anything about trading/timing (and I emphatically do not) this is an opportune moment for PRXI.
    18 Jun 2013, 03:47 PM Reply Like
  • Wilson Wang
    , contributor
    Comments (884) | Send Message
     
    I've been adding and will continue to do so for my fund. Regardless, conservative estimates pin the stock to be about 2.5. Excuse me, did I say conservative, I mean OVERLY conservative.
    18 Jun 2013, 08:09 PM Reply Like
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