December 28, 2011 - 1:07pm EST by
2011 2012
Price: 1.84 EPS (.27) $0.01
Shares Out. (in M): 49 P/E 0.0x 0.0x
Market Cap (in $M): 89 P/FCF 0.0x 0.0x
Net Debt (in $M): 5 EBIT 0 0
TEV ($): 84 TEV/EBIT 0.0x 0.0x

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With a clear catalyst in place PRXI should appreciate 50-200% in the next 3.5 months.  The PRXI story has been rehashed multiple times on VIC, but now it is a simple story that should generate substantial returns in a very short period of time with very little downside risk.

This is due to the December 23rd announcement that an auction house has been retained to sell the artifacts of the Titanic and related IP.  The winning bid will be announced on April 15, 2012, one day prior to the 100 year anniversary of the sinking of the ship. For the past two decades PRXI has been exhibiting the artifacts of the Titanic, while preserving them and fighting numerous court battles on the actual ownership of the artifacts. 

In 1994 the courts deemed PRXI as salvor in possession of the artifacts.  This means they had the exclusive rights to exhibit the artifacts and do dives to the site, in exchange for the responsibility of maintaining them with the highest amount of care.

In August of this year, the courts awarded the artifacts to PRXI with certain stipulations.  They must maintain the same standard of care.  Importantly, they are allowed to sell the artifacts and related IP, but they must keep the entire collection together and can only be sold to a suitable buyer who will provide for their long term protection.

On December 23rd, the company announced that Guernsey, a top five auction house has been retained to sell the assets and the winning bidder will be announced on April 15th.  Guernsey will receive a $5mm fee and 8% of the gross proceeds.

So what the artifacts and related IP worth?  That is the big question.  In 2007 the court appointed appraisers valued the artifacts at $189 mm.  This excludes the 2010 dive and related IP, as well as the salvor in possession rights.  It is important to note that historically court appointed appraisals are very conservative and in almost every case art, collectables, etc.  are sold for more than their appraisals. Also, the appraisals are based on what the experts think the asset will sell for in an auction.

The company also has a small exhibition business (The Bodies, Dialogue in the Dark, etc) which does about $30mm in annual revenues.

 In a baseline valuation case:

            Artifacts and related IP               $189mm

            Salvor in possession rights          $0

            2010 dive and IP                        $0

            Exhibition business                     $30mm (one times revenues)


            Total                                        $219mm


            (Auction fees)                           ($23mm)

            Net value                                  $196mm


There are 48.5 mm fully diluted shares so $196mm/48.5=$4.04 per share.

The auction fees are actually paid by the buyer, but I am assuming they will be reflected in the value.

If the artifacts are worth more than $189mm and you assign some value to the 2010 dive and the salvor in possession rights you could get easily get more than $4.04 per share.  If you want to assign no value to the other assets and discount the core artifacts by a large factor you would still get a significant premium to today’s price.  Given the announcement date is only 3.5 months away, investors from here should earn an extremely attractive IRR in a very short period of time with little downside risk.




Results of auction announced on April 15, 2011
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