PRXI - Premier Exhibitions

[asw310]

http://boardvote.com/symbol/PRXI/communique/461106

 

The story with Premier Exhibitions is pretty simple and well known, but its not pretty at the moment. The company owns the RMS Titantic assets estimated to be worth substantially more than the current market cap. PRXI is having trouble with its operating business, but it also doesn't seem to be burning through tons of cash either.

 

With the termination of the LOI with Hampton Roads for the titantic assets today, I imagine the stock will be trading much lower than its current price of $1.50 tomorrow morning when the market opens.

 

Certainly intriguing. I know a lot of special situation type and value guys have been interested in the stock for quite a long time now.

[ragnarisapirate]

The fact that it seems widely accepted that the price will fall makes me think it won't... If you look at when Seller's distributed shares, there was a lot of thought that the price would fall- but it didn't really.

 

That said, I am one of the value guys that is really interested in the stock.

 

-Jeff, the contrarian.

[krazeenyc]

The fact that it seems widely accepted that the price will fall makes me think it won't... If you look at when Seller's distributed shares, there was a lot of thought that the price would fall- but it didn't really.

 

That said, I am one of the value guys that is really interested in the stock.

 

-Jeff, the contrarian.

 

Are you already invested in it? I've read a bunch of stuff on PRXI a while back, and a bit rusty of the facts. But I wonder who exactly will buy these Titanic assets given the strict rules of ownership.

 

My understanding is the assets were appraised at appx $180 million. But that there are a lot of restricitions regarding the assets such as the fact that they they cannot be sold piece meal. And that they essentially have to be displayed to the public.  My hesitation for buying was that these assets seemed encumbered in that the available pool of buyers that would buy these assets under these restrictions seem very small. 

 

Do you own the company for any reason other than the titanic assets? Can these rules ever be lifted under some sort of hardship rule?

d

[ragnarisapirate]

The fact that it seems widely accepted that the price will fall makes me think it won't... If you look at when Seller's distributed shares, there was a lot of thought that the price would fall- but it didn't really.

 

That said, I am one of the value guys that is really interested in the stock.

 

-Jeff, the contrarian.

 

Are you already invested in it? I've read a bunch of stuff on PRXI a while back, and a bit rusty of the facts. But I wonder who exactly will buy these Titanic assets given the strict rules of ownership.

 

My understanding is the assets were appraised at appx $180 million. But that there are a lot of restricitions regarding the assets such as the fact that they they cannot be sold piece meal. And that they essentially have to be displayed to the public.  My hesitation for buying was that these assets seemed encumbered in that the available pool of buyers that would buy these assets under these restrictions seem very small. 

 

Do you own the company for any reason other than the titanic assets? Can these rules ever be lifted under some sort of hardship rule?

d

 

I do not own the stock, but did a bit ago. The appraisal is probably wildly high, but that doesn't make them an un-interesting asset. Basically, I am willing to pay a good bit less than what I think the Titanic stuff could get, then take the return of capital from the company so that I don't have any real cost basis, then get whatever is left for free, less the time that I had the money tied up.

 

I have no idea if they could get the court to approve something other than what they have (which, as you point out, makes the assets worth a lot less) and as such, don't see myself paying nearly what we are trading at for the stock.

 

If this thing trades for, say, 1/2 what it presently is, then that seems REALLY interesting to me. Maybe a pipe dream, but, maybe not. The real problem here is that the assets are what makes this thing valuable, but we have little to base the value on- a simple cash flow of them makes them worth a lot less than that appraisal- that's why Premier isn't doing them as an exhibit... right?

[DTEJD1997]

WOW:

 

I just read the transcript from the latest quarter's earnings. 

 

The shareholders are in revolt!

 

To say they are disgruntled is an understatement.

 

It was also interesting to see that management and the board of directors have "learned" a lot about the process of negotiating and selling the assets. 

 

These dudes are "learning"?  I thought they were supposed to already KNOW what to do.  If you are the CEO or upper level management, you aren't "learning on the job".  You are supposed to know what to do.

 

I have no confidence in management after reading that transcript.  The results from the "sale" of the Titanic assets has been an absolute disaster and fiasco.

 

Management appears quite adept at lowering value, not creating it.

 

At $1.50/share, I'm wondering if this thing isn't wildly overvalued?

[xtreeq]

How well are management's incentives lined up with shareholders' ? That's the key in my opinion.

 

A second variable is time from harvesting the assets to returning the funds to shareholders as we must discount for time value .... anyone with insights on this?

[SFValue]

WOW:

 

I just read the transcript from the latest quarter's earnings. 

 

The shareholders are in revolt!

 

To say they are disgruntled is an understatement.

 

It was also interesting to see that management and the board of directors have "learned" a lot about the process of negotiating and selling the assets. 

 

These dudes are "learning"?  I thought they were supposed to already KNOW what to do.  If you are the CEO or upper level management, you aren't "learning on the job".  You are supposed to know what to do.

 

I have no confidence in management after reading that transcript.  The results from the "sale" of the Titanic assets has been an absolute disaster and fiasco.

 

Management appears quite adept at lowering value, not creating it.

 

At $1.50/share, I'm wondering if this thing isn't wildly overvalued?

 

The value here is, or is not, in the monetization of the assets.  When they say "learning" seems to me they are talking about a deal for the assets, which, is pretty obvious now, they did not know how to handle. Capital allocation or in this case doing a complex deal is not a common trait among CEOs (or upper management), unfortunately.

 

They have been trying to sell the assets for aprox. 2 years, by now they must have an idea of what the appetite (if any) is there for them. 

 

they accepted a non binding LOI for the amount they were looking for (appraisal value) which fell through due to funding.  the question is are there any well funded groups with lower offers? again, they must have an idea by now.

 

they will (they said) spend aprox. 2 mill on share buybacks. The background of Sellers (chairman) and the CEO (was the COO of sellers hedge fund) is in investments, do they understand that the repurchases make sense only if done below IV or NAV or whatever you want to call it, and more importantly, the IV or NAV of this is almost solely the realizable value of those assets?

 

 

 

 

 

[krazeenyc]

Imagine if owned a wonderful 6 Bedroom House right at Long Beach in California. You are right on the beach, the house is up to date -- it has everything you'd want.  Under normal market conditions this house would sell for $7 million dollars. However the owners are selling it for the bargain price of $6 million but wait -- there are some catches.

 

1) You can't live in it

2) You can't rent it out (long or short term)

3) You are required to allow everyone who wants to visit a chance to come inside and look around -- you can charge admission for this.

4) and oh yeah, you're still on the hook for property taxes and other upkeep costs for the house.

 

Who in their right mind is going to buy this house? This is what I've always thought of the RMS Titanic Assets owned by PRXI.  If there is something that I'm missing about why this asset will be moved near the assessed value -- I'd love to hear it -- b/c it'd make us all a tidy profit.

[SFValue]

Imagine if owned a wonderful 6 Bedroom House right at Long Beach in California. You are right on the beach, the house is up to date -- it has everything you'd want.  Under normal market conditions this house would sell for $7 million dollars. However the owners are selling it for the bargain price of $6 million but wait -- there are some catches.

 

1) You can't live in it

2) You can't rent it out (long or short term)

3) You are required to allow everyone who wants to visit a chance to come inside and look around -- you can charge admission for this.

4) and oh yeah, you're still on the hook for property taxes and other upkeep costs for the house.

 

Who in their right mind is going to buy this house? This is what I've always thought of the RMS Titanic Assets owned by PRXI.  If there is something that I'm missing about why this asset will be moved near the assessed value -- I'd love to hear it -- b/c it'd make us all a tidy profit.

 

half off? free call on judge changing terms? I agree, but then again, never understood the art world

[APG12]

Imagine if owned a wonderful 6 Bedroom House right at Long Beach in California. You are right on the beach, the house is up to date -- it has everything you'd want.  Under normal market conditions this house would sell for $7 million dollars. However the owners are selling it for the bargain price of $6 million but wait -- there are some catches.

 

1) You can't live in it

2) You can't rent it out (long or short term)

3) You are required to allow everyone who wants to visit a chance to come inside and look around -- you can charge admission for this.

4) and oh yeah, you're still on the hook for property taxes and other upkeep costs for the house.

 

Who in their right mind is going to buy this house? This is what I've always thought of the RMS Titanic Assets owned by PRXI.  If there is something that I'm missing about why this asset will be moved near the assessed value -- I'd love to hear it -- b/c it'd make us all a tidy profit.

 

I don't really get your analogy. You can walk away and go buy another house but there's only one Titanic. Value investors don't like to invest in assets that do not produce cash flow, but I think this bias is a mistake. Assets are assets whether they produce cash or not. In any event, I get your point that the required terms are too onerous.

[DTEJD1997]

Hey all:

 

I've got some more thoughts on this.

 

The problem as I see it is that management's incentives are not really aligned with shareholders.  As was pointed out several times on the conference call, they are getting paid handsomely.  What are the results?

 

The way they handled the asset sale of the Titanic relics was amateurish at best.  They really got jammed up on that.  YEARS have gone by, with a very poor result.

 

They are getting paid WAY TOO MUCH with poor results.  If lower level workers performed like this, they would be fired instantly.  Why does upper level management get a pass?

 

Management sounded completely tone deaf and out of touch on the conference call, saying "we did a good job", "we are learning"....They rightfully got called out for this.

 

And what is the Viagra deal?  Are they selling Viagra now too?  Has some one hacked their site?  Do they have a problem with a cyber squatter?  It seems to me that their website and Google results would be pretty close to the top of the list of things to be concerned about.  The Viagra problem shows yet again that they are not on top of things.

 

You add it all up and you've got problem for shareholders.  Time is not the friend of shareholders here.

[SFValue]

Imagine if owned a wonderful 6 Bedroom House right at Long Beach in California. You are right on the beach, the house is up to date -- it has everything you'd want.  Under normal market conditions this house would sell for $7 million dollars. However the owners are selling it for the bargain price of $6 million but wait -- there are some catches.

 

1) You can't live in it

2) You can't rent it out (long or short term)

3) You are required to allow everyone who wants to visit a chance to come inside and look around -- you can charge admission for this.

4) and oh yeah, you're still on the hook for property taxes and other upkeep costs for the house.

 

Who in their right mind is going to buy this house? This is what I've always thought of the RMS Titanic Assets owned by PRXI.  If there is something that I'm missing about why this asset will be moved near the assessed value -- I'd love to hear it -- b/c it'd make us all a tidy profit.

 

I don't really get your analogy. You can walk away and go buy another house but there's only one Titanic. Value investors don't like to invest in assets that do not produce cash flow, but I think this bias is a mistake. Assets are assets whether they produce cash or not. In any event, I get your point that the required terms are too onerous.

 

that's fine, but how do you value it? (circular reference to gold jaja)

[premfan]

I was owner from late 2009- early 2012.  Here are my thoughts:

 

- Management has done a very good job in turning the operating business

- Horrible job in trying to deal the assets

 

 

Management has ruined any leverage they had by telegraphing how "bad" they want this deal done. Management be like the fonz be cool.  Management has acted needy and the potential buyers know this. If I were management I would put out a press release saying we are no longer willing to deal the titanic assets. We are working on optimizing the asset for  our shareowners.

 

I haven't followed this company in about a year. It might be time to look at them again.  I feel the main question isn't when the assets will be sold but, what is the normalized earnings for the operating business. 

 

 

 

 

[krazeenyc]

- Management has done a very good job in turning the operating business

- Horrible job in trying to deal the assets

 

 

From what I've seen I agree with these 2 statements.

 

For those who think it's about the management -- the Chairman was Sellers right? Since they owned a bunch of stock, I assume they were highly motivated to move the titanic assets. I actually think they've done a pretty decent job recently with the exhibitions business -- the past year I think they ran into some issues that were out of their control (Hurricane Sandy). They could consider contracting out the job of finding a buyer for these assets... but I don't know who the buyer would be. Ultimately the buyer of the Titanic assets would have to pay 10 figures plus to essentially have their name attached to showcasing these artifacts. You are essentially hoping for a $100 million + donation.

[APG12]

that's fine, but how do you value it? (circular reference to gold jaja)

 

Haha, I knew that was coming. You can't assign an intrinsic value but that doesn't mean it's worthless, that's all I'm saying. It's such a trivial observation that I doubt anyone disagrees.  ;)

 

Back to PRXI. I once saw someone describe the situation as a value investment that was taking so long that even the value investors were getting out. This seemed spot on to me. I only recently purchased shares so in the event that the assets are monetized, my IRR is going to be better than a lot of other people in this stock. I think that a lot of investors also need to step back and look at the big picture. If your investment doubles in 7 years, you'll have made 10% annualized which is nothing to sneeze at in this low-return environment. Even if the asset sale takes several more years, the IRR is really not going to be as bad as one would imagine after reading that conf call transcript!

 

So, my conclusion is that while everyone is focused on the timing of the sale, we should be far more focused on the sale price. Shareholders are really pressuring management to make the sale ASAP so let's hope that they don't sacrifice price for speed. There were a number of callers who just wanted them to sell the assets for whatever they can get at the moment. Folks, this company has been failing to execute for far too long but let's not all lose our heads! Extraordinary patience is a requirement to make money in this.

 

Which brings me to an observation I've made about my own emotional reaction to my investments: it's far easier to be patient and emotionally detached when a stock does not represent a large portion of your investment portfolio (I'm full of trivial observations today haha). Observe Exhibit A: http://seekingalpha.com/user/8467641/comments

[ragu]

I feel the main question isn't when the assets will be sold but, what is the normalized earnings for the operating business.

 

The only people who'll be in more trouble than those that own this for the assets are those that own it for the operating business.

 

Best,

Ragu

[gg]

I've owned PRXI a few times over the past couple of years, mostly trying to trade on the market's pessimism/optimism on their ability to sell the assets. But one thing I have always had trouble with is that I think that many investors are anchored to the "appraisal" value of the titanic assets of ~$180 million. People often forget that appraisals are done by a hired 3rd party, and when dealing with something so illiquid, unique, and with stringent rules on how the asset can be utilized, there's no real way an appraiser can determine a value here. The only real value indicator is finding someone who will buy it, and seeing what they will pay (non-binding LOIs from non-profit groups who can't come up with the money do not qualify as a legitimate indicator of valuation).

 

On a side note, I live in Chicago, where we have a couple world-class museums that I visit every once in a while, and I've thought to myself: if one of these museums bought the entire Titanic collection and displayed them, would I really care to go to the museum to see them? The answer is honestly, not really. I am interested in history, art, and science--and I truly enjoy going to the local museums when there are interesting exhibits, and maybe I'm an outlier-- but frankly I'm just not that interested in the Titanic and I don't know really get what the attraction is.

[DTEJD1997]

On a side note, I live in Chicago, where we have a couple world-class museums that I visit every once in a while, and I've thought to myself: if one of these museums bought the entire Titanic collection and displayed them, would I really care to go to the museum to see them? The answer is honestly, not really.

 

To all the bulls out there...think about this...the people who were willing to PAY good money to see the relics have largely done so.  Once somebody has seen them, I don't think they will go back 2-3 years later.  So it is largely a one use audience.

 

Thus, the "paydirt" has largely been mined out, and now the mine is worth a LOT less.  The time to be selling Titanic assets was a few years ago...not now.

 

Of course, there are people that are fanatics and will come multiple times, but they are probably a very small subset of audience.  There are also people that might have missed it the first time around too....but I just don't see these things being worth $180MM.  Not even close.

[Kraven]

I don't really care one way or the other, but guess I have a bit of a different view on it.  For whatever reason the Titanic has captured a place in people's minds and they continue to be fascinated by it.  I could see the assets having tremendous value.  Management has clearly butchered the whole thing.  I have to think there are any number of people/banks that could have moved these assets.  In any case, I am not sure why people think there isn't potentially value here.  Why is a painting worth $60 mil or whatever?  This is a boatload (literally) of different things.

 

To me the logical resting place absent some free spending museum is a high traffic tourist area where something could be built around it.  Times Square and Las Vegas come to mind with perhaps Vegas being better.  Some hotel could make some hay with it I would assume.  Just issue a few junk bonds and see what happens!  It's not like that money needs to be paid back.

[krazeenyc]

I don't really care one way or the other, but guess I have a bit of a different view on it.  For whatever reason the Titanic has captured a place in people's minds and they continue to be fascinated by it.  I could see the assets having tremendous value.  Management has clearly butchered the whole thing.  I have to think there are any number of people/banks that could have moved these assets.  In any case, I am not sure why people think there isn't potentially value here.  Why is a painting worth $60 mil or whatever?  This is a boatload (literally) of different things.

 

To me the logical resting place absent some free spending museum is a high traffic tourist area where something could be built around it.  Times Square and Las Vegas come to mind with perhaps Vegas being better.  Some hotel could make some hay with it I would assume.  Just issue a few junk bonds and see what happens!  It's not like that money needs to be paid back.

 

I don't doubt the value of the titanic artifacts. Most expensive art that you see purchased is not being put permanently at a museum. And the pieces that are given to a museum would otherwise be in the hands of a private collector and hidden from the world -- essentially the benefactor is giving the world a gift when they donate it to a museum.  In the case of these artifacts, they are required to be available to the public -- so whether Bezos (random rich guy) buys it or not -- the public will get to see them.

 

By the way, I WANT to be convinced that there is a logical buyer. (So I can buy PRXI)

[ItsAValueTrap]

Am I the only person who shorted this?  (In hindsight I covered too early.)

 

Obviously they've been trying to sell these artifacts and haven't been able to get an offer that's close to $180M.  Presumably they got out of the Guernsey auction because the reserve price wasn't met.

[luck]

wow.  what an incompetent management team.  the viagra pharmacy question was the funniest thing i've come across in the last few days.  andrew shapiro is a top-notch activist.  hopefully, he and others can light a fire & make some changes.  at that point, might be worth looking into.

[OracleofCarolina]

Noticed in a 8-k a couple if weeks ago, they added a new exhibit in conjunction with the Newseum in DC about the FBI and solving crimes...PRXI did not even bother to put out a press release...

[OracleofCarolina]

http://finance.yahoo.com/news/premier-exhibitions-inc-adopts-compensation-210100367.html

 

It's about time they reduce some of the compensation expenses!

 

 

[APG12]

PRXI is down another ~30% since the last post here. Has everyone left this thing for dead? I absolutely refuse to sell any of my stock until they offload the Titanic. Unfortunately, I keep getting these visions of me as an old man gifting the stock to my great grandchildren.  :P