Premier's Ship Comes In

 | Aug 19, 2011 | 11:00 AM EDT  | Comments
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The wait is over for Premier Exhibitions' (PRXI) shareholders.

On Monday, a Virginia court awarded Premier title to the nearly 3000 Titanic artifacts that the company recovered in six expeditions to the wreck between 1993 and 2004. The outcome was not a great surprise; just a year ago, a federal judge ruled that Premier was entitled to a salvage award of 100% of the market value, which the court determined to be about $110 million, for the company's efforts to recover and conserve those artifacts. Premier had previously been granted title to an additional 1800 artifacts recovered in 1987.

Getting to this point had been a multi-year fight for Premier, so the decision is good news for the company. It may not have been such good news for some shareholders, who might have preferred that the company receive cash from the judicial sale of the assets, liquefying the company. In fact, the markets all but yawned at the decision. There was no great reaction, no remarkable run-up in the stock. While shares closed up 5% Monday after the decision was announced, they have since given back that gain and more. The decision simply was not big news; it was an either/or proposition, just the aftermath of last year's court decision. I admit I believed there would be a bigger market reaction.

Still, Premier now officially owns a valuable collection of assets directly linked to one of history's most enduring tragedies. While difficult to value, it's estimated that the entire collection may be worth $189 million, including $110 million for the post-1987 artifacts (determined by the courts), $35 million for the 1987 artifacts, and $44 million in additive value to the collection due to the company's efforts (the last two figures were from a 2007 appraisal). But it's difficult to make accurate estimates of such a collection of one-of-a-kind historical items. Compounding the issue is the fact that if Premier ever sells the artifacts, it must sell the entire collection; there will be no partial sales. That was part of the Court's decision. While not unexpected, it certainly ties the company's hands.

Premier's situation represents the epitome of the deep-value investor's dilemma. The company owns valuable assets, well in excess of its current market cap ($80 million), and enterprise value ($74 million). But that value cannot easily be monetized, short of a very wealthy collector, museum with extremely deep pockets, or benefactor who wishes to cough up a couple of hundred million bucks. Perhaps James Cameron, who not only wrote and directed the blockbuster film Titanic but also visited the wreck and made a 2003 documentary Ghosts of the Abyss, might have some interest?

Premier also remains the salvor in possession of the Titanic wreck, so future expeditions and recovery of additional artifacts are possible. The company's latest visit to the wreck was in 2010.

Premier, which has seen its exhibition business hit very tough times in the past couple of years, should make the most of next year's 100th anniversary of the ship's demise. Attendance at the company's Titanic traveling exhibitions will be interesting to watch in the coming year. The company currently has four Titanic exhibitions: Las Vegas, London, Greensboro, N.C., and Brazil.

For me, it's all about the Titanic assets. There was a time when the company had a $17 stock price and was generating a nice bottom line, in 2007 and 2008, primarily on the back of Bodies...The Exhibition. Those days are all but gone.

Now, it's all about Titanic for Premier.

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