Success of Titanic Film Eludes Titanic Stock
Titanic Stock Seeks Bouyancy
BUSINESS NEWS
"You take a
look at the
greatest bull
market in
history in the
past four years,
and the stock's
been flat."
- John Duffy,
RMS Titanic
investor
RMS Titanic
stock is
trading at
around $1.50
a share. In
the past year,
it has ranged
from 38 cents
to $2.25 a
share.
RMS Titanic
generates
revenue
primarily by
lending its
collection of
Titanic
artifacts.
For its most
recent
quarter, RMS
Titanic
earned $1.3
million on
revenues of
$2.6 milion.
Divers have recovered money and other artifacts from the sunken Titanic, but some investors in RMS Titanic, which owns salvage rights to the ship, are getting a sinking feeling. (AP Photo/Steven Senne)
By George Mannes
ABCNEWS.com from TheStreet
N E W Y O R K, Aug. 10 - At first glance, it might look tempting to invest in RMS Titanic Inc. After all, the company controls an amazing aspect of modern history: the wreckage of the Titanic, the unlucky ship that sank off the coast of Newfoundland in 1912.
The company has retrieved some 5,000 artifacts from the 2«-mile-deep site and claims the exclusive right to visit and photograph the wreckage. And it has successfully defended those claims in court. Furthermore, the Titanic phenomenon has generated plenty of money these days. The epic movie about the disaster-prone colossus has become the biggest-grossing movie of all time, scooping up $1.7 billion at the box office worldwide. But however captivating the legend of the Titanic might be, the investors in the business of the Titanic are getting a sinking feeling.
Shareholders Attempt Mutiny
One investor of RMS
Titanic accuses the
president, George
Tulloch, of poor
management. Another is
suing to gain possession
over some shares still
controlled by Tulloch in
a limited partnership.
Meanwhile, in a fight that has pitted him against the rest of the board, Tulloch removed those shareholders and two others from the company's board last year. RMST, a bulletin board stock that doesn't trade on any major exchange, is trading at around $1.50 a share, though it went as high as $2.25 earlier this year. Those prices are significantly higher than the stock's 52-week low of $0.38.
But John Duffy, a director of the investment banking firm Keefe, Bruyette & Woods and one of RMS Titanic's ousted directors, says that the recent price rises don't accurately reflect the stock's potential for the years that he and other investors have been in the company.
The stock's performance "could be characterized as abysmal, poor, sub par," says Duffy, who invested about $25,000 in the company for his stake about four years ago. "You take a look at the greatest bull market in history in the past four years, and the stock's been flat." Titanic CEO: `Terrible Manager'
The fundamental problem with the company, Duffy says, is Tulloch, a former BMW dealer who has devoted more than a decade of his life to the Titanic shipwreck. Although he acknowledges Tulloch's heroic efforts in bringing up artifacts from the wreck, Duffy has a low opinion of Tulloch as a businessman.
"Frankly, he's been a terrible manager," says Duffy. "He's a romantic. He thinks that every idea he has is the greatest thing since sliced bread. And it turns out to be a miserable Failure."
Tulloch, who's doubling as the acting chief financial officer, isn't available to answer comments like these. He's on a boat in the North Atlantic, where his latest expedition to the site is attempting to recover, among other items, a section of the hull that salvagers tried but failed to recover on a previous expedition.
But Matt Hayden, a company spokesman, says, "The
company's financial performance speaks for itself." In the quarter ended May 31, the company reported income of $1.3 million on revenues of $2.6 million, far higher than income of about $57,000 on revenues of $405,000 one year earlier. The company does not pay dividends and says it has no plans to do so.
The Manhattan-based RMS Titanic, which counts only three employees beyond Tulloch, makes its money primarily by lending parts of its collection to other companies who put them on display and give RMS Titanic a cut of admission fees and merchandise, such as books and reproductions, sold at the exhibit.
Currently, major exhibits of RMS Titanic's artifacts are on display in Boston, Germany and Japan. The company also hopes to put together another exhibit that could travel around the world by boat, and even to construct a virtual-reality attraction from footage it is collecting on the current expedition.
Court Battle Looms Ahead
Duffy is by no means the only shareholder unhappy with Tulloch. The most peeved appears to be William Gasparrini, who sued Tulloch in Connecticut Superior Court in September 1997. Gasparrini went to court last fall to get control over what he considers his rightful portion of RMS Titanic stock-a chunk of the shares held by a limited partnership called Titanic Ventures Limited Partnership. Titanic Ventures was organized in 1987 to explore the Titanic wreck and pull up artifacts from the site. Since 1993, though, when it transferred its assets and liabilities to the publicly traded RMS Titanic, its only assets have been a stake in RMS Titanic of 36.3 percent, which Tulloch, as general partner, votes in a block as he sees fit. Gasparrini, who states in his suit that he has sunk more than $1.8 million in Tulloch's Titanic ventures over the years,is suing to get Tulloch to distribute shares to Titanic Ventures partners in proportion to their stake in the partnership, in accordance with agreements Tulloch signed in 1995 and 1996.
In his own court filing, Tulloch insists he shouldn't be held to those agreements. Among the allegations, he says the first agreement never went into effect and that Gasparrini fraudulently induced him to sign the second. A court will decide who's right. But at least one other shareholder has already decided. "I think it is inappropriate for Tulloch to hold onto the shares and not distribute them to the rightful owners. And I've told him so," says Robert Slavitt, a Connecticut lawyer who is senior partner in the Norwalk law firm Slavitt,Connery & Vardamis.
Slavitt, along with Duffy and Gasparrini, was one of the four directors that Tulloch voted out of office last year,leaving himself as the only surviving director. If Gasparrini succeeds, he could upset the balance of power in RMS Titanic. Tulloch, according to a company filing, would go from controlling nearly 37 percent of the company to less than 12 percent. Gasparrini would go from a 12.6 percent stake to 24.4 percent. What Gasparrini would do with that stake is unclear,because he wouldn't comment. But it's conceivable he might try to remove Tulloch as chief executive. That's what the RMS Titanic board was trying to do last year, Duffy says, before it got thrown overboard.
Business Sails Along
Meanwhile, RMS Titanic's business is sailing along. The company hopes to beef up its Web site soon, adding new merchandise to the coal, blueprints and T-shirts it already sells.
And Titanic will have plenty of TV exposure in the coming week. This year's salvage expedition is slated to be covered by a network news features program. A two-hour live broadcast, featuring robotic cameras exploring the ship, will air soon on the Discovery Channel. "George deserves the credit for the vision of finding the artifacts and all that stuff and bringing them up," Duffy says. But, he adds, "Are shareholders going to be making money? Not as long as George is in control."
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