Premier Exhibitions 4Q13 update / Closing this position

It looks like the company’s efforts to sell the Titanic artifacts are going poorly.  However, given the drop in share price and $96M market cap I think that it is prudent to cover.

Intrinsic Value

Intrinsic value is hard to estimate.  The artifacts could sell for a lot with the proper marketing and salesmanship.  My guess as to Premier’s intrinsic value is anywhere from $20M-$80M.  $30M for the operating business and $50M for the Titanic assets seems like the best-case scenario to me.  I am not going to try to chase every last penny and am going to cover to be safe.

Sale progress

  1. No positive news on the sale.
  2. The company has come out and said that they are negotiating “exclusively” with a consortium of individuals.  This suggests to me that nobody else is interested in the assets.  The company isn’t even talking to anybody with the financing to be able to buy the assets.
  3. The confidentiality regarding the consortium doesn’t make too much sense.  Apparently they intend on going public with their efforts to raise money.  So why all the confidentiality?
  4. The company will look at other ways of selling the Titanic assets.  This suggests that their previous attempts at at selling the assets are unlikely to succeed.  They have already tried selling the assets themselves and have tried to auction them through Guernsey’s.  Premier says that they will likely hire an investment bank to try to monetize the assets.

Here is what the 4Q13 earnings press release states:

Update on Titanic Monetization

As previously communicated, on October 15, 2012, the Company entered into a non-binding letter of intent with an entity representing a group of individuals (the “Consortium”) working to effect a purchase of the stock of RMS Titanic, Inc. Since entering into the LOI, Premier has been negotiating exclusively with this group. The entity with whom the Company is negotiating has been soliciting federal, state, and local government entities, as well as philanthropic contributions, to build support to go public with a broader campaign to secure capital necessary to complete a transaction. They continue to request confidentiality until they feel comfortable that there is sufficient support to go public with the project.

Due to the complexity of the transaction and the many elements that are necessary for consummation, the process has taken longer that Premier had hoped. While the Company continues discussions with this group, Premier also recognizes the uncertainty of their completing a transaction and obtaining funding commitments. The Board is therefore considering the full range of strategic and financial alternatives in this regard, which likely will include retaining an investment bank, and will pursue possible paths in parallel.

The complexity of these assets, and the need to comply with the underlying court orders, require that any transaction or arrangement be more carefully structured and executed than a typical transaction. Timing is certainly a factor, but it is not the only factor. The Board and management, together, remain committed to maximizing shareholder value.

*Disclosure:  Short PRXI and covering my position.

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