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Sold half of Premier Exhibitions (PRXI) position

March 27, 2012

Bids on the Titanic artifacts and intellectual property put up for auction by Premier are due by next Monday. Guernsey’s, the auction house, will review the bids next week and declare a winner, that is, if there are any suitable bids. The new owner must agree to the requirements established by the court and be approved, thus the lag between the due date for the bids and the announcement of a winner.

I have no idea whether there will be a successful bidder. No idea whether if there is a successful bidder the amount bid will be less than, equal to or more than the appraised value of the auction items. Yesterday, the market cap of Premier stood at $165 million, well below the $189 million appraised value of the auction items. Mr. Market obviously thinks that either the auction will bring less than the appraised value or that management somehow will not return the entire value raised at the auction to shareholders.

My  original investment thesis was based on realizing the value of the Titanic assets. That has happened to a greater or lesser extent with the recent share price runup, but the risk has also risen commensurately. The upcoming auction will basically determine value of the company. For my part I’m an investor not a speculator, so I’m a bit risk averse. With that in mind I’ve sold half my position in Premier at $3.48, locking in a greater than 100% gain.

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7 Comments
  1. This sounds like it was an interesting idea, annoyed I missed out on it!
    We have quite a few holdings in common as I’m sure you’ve noticed – GRVY, AAB and one day (next pullback I swear!) HHC.

    Have you thought of doing a monthly update like I do on my blog? Maybe I’m just being an idiot but I struggle to work out how your portfolio looks (or is that deliberate?). In that respect, your updates on selling GRVY were very useful – I sold 2/3rd of my position around $3.00 too.

    D

    • D

      The purpose of my blogging is not really to track the results of my portfolio. I invest for myself and I’m not really interesested in competing on that score. The idea was that the blog would provide me discipline, force me to more closely analyse each investment and document my investment thesis. Also I thought it might stop me from making impulsive trades. And then there would be the threat of public humiliation if I didn’t review and refine my investment thinking before writing.

      So, you see, a monthly update on performance is not really part of the blog’s purpose. And yes, the lack of transparency about portfolio composition is on purpose.

      Glad to hear that we share common investments. I enjoy reading your blog and, if possible, filching ideas.

      Thanks for the comment

      • The threat of public humiliation is definitely the best thing about putting your ideas “out there”. You are forced to think “how will this look if I am wrong?!” a lot more than if it was just between you and your brokerage account.

        Do keep up the good work!

  2. Taylor Mason permalink

    I sold my entire PRXI stake for the same reasons you mentioned. Sold at $3.15 (87% annual gain). I figured I’d be better off taking the sure 87% gain, rather than taking on the risk of the auction falling through.

  3. Ranajit permalink

    Congratulation on maintaining a great blog,,I am a long time reader but I am generally a lurker…I also have quite a few positions in common with you..GRVY, PRXI, BAC-warrants and AIG

    I have sold 90% of PRXI shares in the last few days as I didn’t want to jeopardize majority of my 100%+ gains on a binary event ( auction of the titanic) and have kept the rest 10% ( a sort of call option) just in case they do manage to auction off the Titanic assets at a large premium ( but I might sell them too before the auction results are out if the stock price goes anywhere close to $4). I couldn’t find any precedence of an auction with such restrictions being a runaway success and could not make an informed decision ..so I sold.

    The big issues for me – even if they sell the titanic assets – is getting approval from the Judge, tax issues on the sale price and final disbursement of the proceeds. I am not sure if an intelligent buyer would go through all this trouble to buy the Titanic assets and also agree to the conditions set forth by the Judge – agree to keep the collection together and also allow it to be displayed to the public occasionally -while at the same time risking capital to earn enough revenue in order to offset at least the cost of maintenance of the assets. Even when that buyer is a charitable organization. ( PRXI admits in their latest 10K that revenues from the Titanic exhibitions has been lower than previous years).

    As for GRVY, I actually added to my position. I guess I don’t have your discipline ;-). I did invest in GRVY as an NCAV stock but the growth aspect was always part of my thesis – so I am still holding. GRVY may have a good chance of earning a decent amount on Ragnarok II. The big uncertainity about the release of Ro2 has been eliminated recently so did not find a reason to sell.

    Anyway good luck with rest of your PRXI holding. I would surely be keenly following the proceedings.

  4. Thanks for commenting Ranajit. I’m a lurker on many bulletin boards and blogs too.

    This will be interesting. I’m on opposite sides (well, not really) regarding holding vs selling PRXI and GRVY. Today being the last day before the auction for the Titanic artifacts closes I was sorely tempted to sell the balance of my shares in PRXI. I’m inclined to agree with you intellecturally that a rational investor should sell PRXI at this point, but I just couldn’t pull the trigger with the market cap of PRXI still under the appraised value of the artifacts. I think I’ll regret it, but maybe I’ll have a few days next week to take the plunge.

    On the other hand I had no problem in selling out of GRVY when I did (the day they announced the launch of Ragnarok 2). In retrospect this was a fortuitous move as the shares have retreated significantly since then. I have this echo in my ear that goes “buy on the rumor; sell on the news”. I used to think these pat phrases were just that, fluff. They simply couldn’t be true. But with a few years of experience I’m now of a mind that this common wisdom is really that, wisdom.

    Nevertheless, I agree with you that Gravity has significant potential with Ragnarok 2 now launched. if GRVY shares fall back to cash levels (around $2.00), which, given the recent share price action, might even happen, I will most likely be a buyer again.

    Good luck to you as well and thanks again for your comment.

    • Ranajit permalink

      I must admit that selling PRXi wasn’t an easy decision. The biggest deterrent was the Titanic brand name and the fact that an insider held close to half of the shares. I was always thinking, what if a crazy rich guy came along and picked up the assets for say $500 million or even a $1Billion ( we can dream, can’t we ? ;-)).

      However ultimately what got to me is that fact that the assets needed to be sold and kept together (in which case the values of the individual artifacts would not be reflected as they are for other auctions) and the judge had to approve of the buyer’s plans. The final tax issue and disbursement was also a big concern. With so many unknowns I guess I just didn’t have the stomach to hold on .I also tend to buy on rumors and sell on news but in this case an adverse news could do much more damage.

      Btw I am surprised that an insider sold ~25% of his holdings last week in PRXI under 10b5-1. I generally don’t give much credence to insider sells but in this case, I couldn’t help but wonder if he had an inkling of something in Feb ( or that he did not think Titanic would be worth that much) when he initiated it.

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