So why did I restart my position?
- The company currently has a market cap of $105 million or so. They have no debt that is recourse to the parent company (the note payable on their balance sheet is only recourse to the exhibition company). I tend to agree with this analysis of the artifacts worth, but even if you think that is too optimistic, the artifacts have been appraised at $190 million. Take out a 10% commission (likely too high at this point!) and 30% for taxes and you get $120 million in after-tax value of the artifacts. The company has already said they plan on distributing all proceeds from the sale to shareholders, so there is no real reinvestment risk. Thus, with a market cap of $105 million, the market is forecasting a really negative sale scenario
- I don’t think this is frequently pointed out, but the $190 million appraisal does not include the value of the intellectual property from their most recent excavation, which produced things like this History Channel special box set. What do I think the value of that type of intellectual property is? Honestly, I have no idea. But there is some real value there, and it should add another layer to the margin of safety.
- The exhibits business, which I had always treated as a net negative, is really turning a corner. The recent acquisition looks to be a home-run, and the company was solidly profitable despite elevated SG&A expenses from the acquisition and (likely) related to the recent management changes and expenses associated with the auction process. While the value from the exhibit business is likely to be small compared to the value from the Titanic assets, there’s some real upside here, and it really represents a cherry on top of the investment.
Disclosure: Long PRXI