When I decided to write about Premier Exhibitions (Nasdaq: PRXI), operators of the popular “Bodies” exhibits, for Realmoney.com in a piece I called “Potential Short Exhibit A: Premier Exhibitions” on October 15th when the stock was at $14.69, I thought I was highlighting a nice and easy technical breakdown that would yield a few dollars per share of gains to the downside. Judging by the stock chart–since I looooove charts–it was a clear head and shoulders chart pattern if the stock breached $14. And to bolster my argument, new management was taking the company in new directions and “Bodies” might be feeling a little old–all in all–some signs of weakness for a stock that was up 700% over the past two years.

And, I definitely did not like management’s refusal to put an exact value on the Titanic artifacts they owned–instead, they really appeared to enjoy saying that since the value was only a few million dollars on their balance sheet, the upside was enormous. (Then they would go into how tiny Titanic pieces have been sold for hundreds of thousands of dollars so their 5,000 artifacts could be worth hundreds of millions of dollars)

Within a day, the stock breached $14, and the price quickly dropped–along with the overall market–to the $12.75-$13 range. Technical breakdown confirmed and the stock hung around that price for the past two weeks.

But in no way did I expect this court filing that is now posted on PRXI’s website, that looks to be responsible for the sell off today down to the $11 range. Basically, in a rather strongly worded filing marked October 16th, the United States District Court of VA smacked down PRXI’s ownership claim on these artifacts, saying they’re entitled to a salvage reward, nothing else and that they must post this court order “…to clear any misleading information and confusion caused by this press release.”

I highly recommend you read this filing, it’s actually pretty funny (for a court filing) and statements like “…the court will no longer tolerate maneuvers…to circumvent the court’s final ruling…” and my favorite “…this claim is devoid of any legal or factual merit…and it is blatantly misleading to the public and investors…” make it sound like PRXI really pissed them off.

Wh knows what this will mean for the stock from here–it definitely hurts management credibility and even with this sell off, the stock is up from $2 two years ago. I definitely wouldn’t buy this for a bounce as who knows what else management isn’t telling us.

Trust me, I wish I wasn’t so good at sniffing out hype–everybody enjoys being bullish, I wish I could, too. But this is my fate and my expertise. The truth is that most microcaps and smallcaps, no matter how promising they are, usually have something that is hidden that will bring their share price back down to reality eventually. If you don’t believe me, read my book, I got this way through experience.

UPDATE: It appears 2 “Bodies” exhibits have been delayed –that may have also lead to this drop in price. Boy, when things start to go bad, they really go bad in a hurry!

Disclosure: Timothy Sykes has no position