Premier Exhibition (PRXI) update: Jan 2012
Just before Christmas Premier announced that they will be auctioning off their Titanic salvage artifacts. The sale will take place through Guernsey’s on the 100th anniversary of the sinking of the ship, April 2012. You can read the press release here.
I view this as a step in the right direction for shareholders. Management has finally capitulated, acknowledging that full value of the artifacts cannot be realized though their exhibition operations alone. I’m tipping my hat to the Sellers people for forcing this on management.
Let’s look at what the auction might raise for Premier. The press release quotes an appraised value of at least $189 million for the artifacts. (In my original analysis I gave the artifacts a value of $145 pre-tax) We’ll look at two scenario’s. For Scenario I I’ll assume Premier receives the full appraised value adjusted for inflation and round the number off to $200 million. For Scenario II I’ll assume that they only receive 50% of the inflation adjusted appraised value, or $100 million. I don’t really have any insight into what they might realize so this is just a stab in the dark.
Value of Titanic artifacts to be sold (in millions except per share data)
|Scenario I||Scenario II|
|commission at 8%||($16.0)||($8.0)|
|Net after commission||$184.0||$92.0|
|Net after tax||$119.6||$59.8|
|Cash value per share||$2.28||$1.14|
The commission rate above is the one quoted in the agreement with Guernsey’s, attached to the 8K. There may be some additional advertising, insurance or other expenses associated with the auction but I will assume they are minimal. I have assumed a full load of taxes, which may or may not be the case, as they might be offset by tax loss carryforwards, if there are any at the corporate level, or by expenditures associated with securing the artifacts, if these have not been previously realized. Furthermore, I have assumed, worst case, that shares outstanding have been inflated by the full amount of the Lincoln Capital share raise, which may or may not have taken place; the agreement and prospectus had been previously filed but not necessarily consumated (I haven’t seen any SEC filing but I’m not sure one is needed).
At minimum, however, we should see value flowing to Premier (if not to us shareholders directly) of between $1.14 and $2.28 per share with the sale of the artifacts. This isn’t too bad on a current post-announcement share price of $2.45. Note that in my original analysis I used a per-share value for the entire company of about $4.50 which included components not included above, such as the value of the digital archives relating to the Titanic discovery, theTitanic salvage rights, the exhibition business itself and any cash on the balance sheet.
While I’m not convinced that the full $4.50 per share will ever be realized by shareholders, I think that the current share price of $2.45 still discounts the company’s assets too steeply. So I will continue to hold my shares at least until favorable tax treatment kicks in (just about a month to go) and the discount to intrinsic value narrows substantially.