Premier Exhibitions, the owner of RMS Titanic Inc and Titanic:The Artifact Exhibition, had a sudden stock drop this week. The company in an official statement says:
With regard to the recent decline in our stock price, Premier Exhibitions, Inc. (Nasdaq:PRXI) knows of no specific reason for the decline. As previously announced, the board is currently exploring all strategic and financing options. The board is currently in advanced discussions with a potential strategic partner and is considering several other financing alternatives. We expect to have more news to report in the near future.
Now it could be just a general drift of the market but this is a niche stock, one that is not traded on the big boards. The big problem the company has is that, aside from monetizing the Titanic artifacts, it has been unable to sell the collection to another buyer. The strict conditions imposed by a federal judge means the entire collection gets sold at one time. It cannot be sold in sets or individual lots. The high sale price means only the most wealthy of investors or institutions can afford to purchase. And even if a bid is finally accepted by Premier, then you head off to federal court to have the judge sign off on it. And that will not be easy. The judge will demand lots of proof you are going to maintain the collection. And the hearing will be public. Expect anti-salvors to show up to protest the sale. Not to mention petitions that seek to reopen the salvage award.
Or another reason could be the decision to have a 1 for 10 reverse stock spilt. Normally a stock split gives you stock (for every ten shares you own we give you two). Reverse stock splits are not unheard of but unusual. It is cheaper than a stock buy-back but means investors loose shares. Say you have 100 shares in Premier. Every 10 shares will be converted to 1 share. So instead of 100 shares, it gets cut to 50. In theory, by reducing the number of shares held by investors it increases the market value. Premier had 49.1 million shares before the deadline of 27 Feb 2015. Now thanks to the reverse stock split, it now has 4.9 million shares thus increasing its market value. And its ability to keep the stock price above a certain threshold ($1.00)to be publicly traded as well perhaps bettering the chances for financing.
Investors ought to be worried. They cannot sell the Titanic collection, a major deal to sell shares to another entity fell through, and there seems to be a sense that something is not going right at Premier. Taking back shares is a desperate gamble to keep the stock from sinking below $1.00. As of today, the stock is trading at $3.02. So it seems to have worked but still the stock is more trending down than up. Investors are right to be wary about this stock and perhaps take their cash out when it gets high enough to make some money. But more likely it is a loss on the tax form.