Image source: wikipedia
Yesterday something happened with Premier Exhibitions (NASDAQ:PRXI) that only happens to the most illiquid of issues. AJB Capital, an investor in the company, issued a press release stating it has acquired ~5% of the shares and urged the company to prioritize monetizing the Titanic assets and promptly the stock jumped 50%.
A ridiculous price reaction and I say so owning shares of the company.
Premier Exhibitions main attraction to both investors and customers of its shows over the years has been the artifacts of the Titanic that are in possession of the company.
While the company is no good at making a profit on its exhibitions (something that has hopefully changed since the Dinoking merger), these artifacts have been independently valued (by court order) and determined to be worth $180 million. Given the company's enterprise value of $14 million that's quite attractive even if it is exaggerates the value of the assets quite a bit.
The jump of the share price in response to the press release is rather ridiculous because over the years multiple hedge funds have seen their investment go the way of the Titanic. The Titanic assets and their value has been debated and management has been pressured to monetize these.
Part of the problem is the company doesn't actually own them. Technically it has the salvor-in-possession rights. Which is a special status because the stuff was dug up from the bottom of the ocean. To quote from my previous article (available to Seeking Alpha PRO subscribers and Off The Beaten Path members):
SIP rights carry with them responsibilities that the artifacts must be preserved forever, the artifacts must be sold as a collection and if the articles are sold, the purchaser must be approved by the court and by NOAA (The National Oceanic and Atmospheric Administration). The purchaser must also agree to maintain the artifacts on public display.
The court valuation is from 2007 (before the financial crisis) but to be fair the company did manage to receive a letter of intent to buy the assets for $189 million back as recently as 2012.
Because of this history, I'm not impressed by ABJ Capital spurring Premier on to sell these. Premier is not run by some lazy self serving management that's sitting on a forgotten asset. Hedge funds have gone berserker activist on this company to no avail.
At the same time, I don't belief a +50% jump (the stock has fallen off since) is unjustified. The company does "own" these special assets, the Dinoking merger should improve the operating side of the company and the casino industry (Macau and Las Vegas), which I view as a potentially fit venue, have struggled mightily since 2007 but are improving. The mythical story does still enthrall many people. Case in point; in 2018 the Titanic II is expected to make its first journey.
In short: buying a few of the company's shares is a proposition with much better odds than you get playing the lottery but yesterday's press release should not be considered as a serious catalyst to unlock value here.
Disclosure: I am/we are long PRXI.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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