Playboy Enterprises: Worthless, Part 2

2. PLA Stock is worthless

The price of a company's stock is a genuine indicator of what other people think about that business. It's the ultimate indicator of worth.

In this case, their stock is also worthless.

Playboy trades on the NYSE under the symbol PLA. At least, they used to. Earlier this year, PLA was informed by the exchange that they were in danger of being delisted because their market capitalization had fallen below the $75MM threshold. Delisted...as in...yes, they're a publicly-owned corporation, but on one wants to provide a market for people to buy and sell their worthless stock. PLA took this stinger like any company would: they petitioned the Securities and Exchange Commission to delete any references to the delisting from the annual reports they have to file with the SEC, normally available to the public..

To get a sense of how shitty this company's stock has performed, consider this: the company went public in 1971 with an initial closing price of $23.50. Yesterday, the shitty giant closed at $2.48. TWO FUCKING DOLLARS!!! If you adjusted for inflation, the stock would have to have closed at $62.39 just to maintain the same value it had in 1971. And that even takes into account a virtual two-for-one stock split in 1990, which the company had to perform in order to keep it alfoat.

Assumptions:
average inflation rate of 3.27% over the last 20 years
CPI estimates place a 1971 Dollar worth $5.31 today

Not to mention that the company has never paid a single dividend. Oh, except of the preferred shares Hef got when the company had to recapitalize itself in 1990. Basically, this shitbag had taken his investors for a ride. When he dies, the bunny will mean bubkus--he will effectively be a pronographic Bernard Madoff, who skimmed his company over and over again until he finally left them holding the bag.

Tomorrow: satellite porn and ClubJenna: also worthless

Playboy Enterprises: Worthless, Part 1

There's a story running on Adult FYI about the purported "value" of Playboy Enterprises, which owns such things as the Mansion, the magazine, Club Jenna and some shitty satellite porn networks. The import of the story (link here) is that there are lots of physical assets than an investor would find valuable.

PEI is worthless, at least financially. Here's why.

1. The Playboy Mansion. First off, discount the Mansion as anything of value. The writer at Crane's Chicago Business think it's worth a ton because Hef bought it in the early 1970's for about $1.2MM. Money gained via an IPO, not through his own personal means. They now estimate the property to be worth $35MM. Wonderful idea, but they missed one key problem: the Mansion serves as the collateral for a $50MM loan from the Bank of America (see the entire Credit Agreement here. Copy of the Deed of Trust here.) Even worse, Bank of America is actively looking for other lenders to buy out its stake down to $30MM, as noted in the 7th Amendment to this credit agreement, seen here.. Other indicators that B of A isn't so happy with Hef and the company include: an interest rate increase, an increase in the commitment fee to use the credit facility, a mandatory recapitalization of the company, and a limitation on the company incurring any new debt without the bank's consent.

Basically, if you sold the Mansion, Playboy as a going concern would evaporate. With no other collateral to support any new borrowing, the company would have no way to issue letters of credit or subsidize any short-term finance gaps. Nor would they probably be able to find a new bank, since it's clear they're being kicked out by their old bank.

And let's finally dispense with the myth that Hef "owns" the Mansion. The Deed is in the company's name, always has been. He lives there basically as a renter, and has done so for over thirty years. He's required to pay the company for all of his personal expenses, right after the company spends $100M a year to have an auditor come in and determine the market value of renting that kind of space.

And in case you're financially illiterate:

$1M = one thousand
$1MM = one million

Tomorrow: why would you want a stock that closed at $2.48 per share, when it should be at $62.39, and has never paid a dividend.