Patience is one of the hallmarks of the value investor, and you either have it or you don't. Sometimes stories seem to take an eternity to play out, and that's the case now with Premier Exhibitions (PRXI). Leading up to the 100th anniversary of the Titanic disaster on April 15, the company, was auctioning thousands of artifacts salvaged from the Titanic wreck site in one huge lot. The winning bidder was set to be announced on April 15, but that didn't happen. More than two months later, there has yet to be an announcement.
The outcome is still unclear, but this might one day be a great case study in value investing. It's been a long road: the company was in court for years trying to get the title to the several thousand Titanic artifacts it did not yet own. That hurdle was crossed nearly two years ago, but the ruling involved another wait of up to one year, while the courts specified whether the company would be awarded the title to the artifacts, or the proceeds from the judicial sale of the artifacts. Last August, Premier was given title to the artifacts. I then naively declared at the time that "the wait is over for Premier Exhibitions shareholders."
For its part, the company is only saying that negotiations with potential buyers are ongoing. The transaction has turned out to be more complicated than originally estimated. Of course, not completing the auction as originally stated has sent shares on a roller coaster ride. They peaked at $3.62 on March 29, and over the next eight days fell 37%, when it became apparent that the April 15 announcement was not going to happen. Since then, shares have risen to $2.70. Short interest has also increased, climbing from about 72,000 shares in late March to 1.17 million at the end of May. Looking back to the past two big August court announcements, shares are up 133% since the 2010 decision, and 50% since the 2011 decision.
How this will all end is still uncertain. On paper, the Titanic assets owned by the company were appraised at $189 million in 2007, not including its salvor-in-possession rights, or the intellectual property gleaned from the 2010 expedition. The operating business, which includes the company's exhibition business, and recently acquired acquisition of AEI (Arts and Exhibitions International), is worth something, but it is unclear how much.
Premier is currently a mystery wrapped up in an enigma. Its current market cap is $129 million and its assets are worth at least $189 million -- and perhaps much more. But all of this depends on a deal being done for those assets, what the acquirer is willing to pay, how that deal would be structured, how shareholders would be paid, and the taxability of the transaction.
One of the value investors' great dilemmas is that you never know what assets are really worth until they are actually converted into cash. Furthermore, it is unclear whether Premier would continue to be involved in the display of the Titanic artifacts, and its recent acquisition of AEI only fuels the speculation.
This isn't over yet. We'll see if patience is ultimately rewarded.