#7: The special dividend. This should always have been a non-issue, because the stock will decline by however much is paid. It's only required for tas purposes, and creates more financing difficulties. But many retail investors think it's a great thing. Wrong. And wrong about the amount, too. After special charges, fees, etc. and dilution, it'll be about a dollar a share less than originally estimated.
#8: Combining growth rates. Last year we were told that new PZN would grow at a rate equal to 80% of CCA's growth rate + 20% of PZN's growth rate, or roughly 30%. Oops. Forgot dilution. Some analysts' models now show FFO calculations based on issuing equity at $15 for half of next year's capital needs. Try 30% dilution instead of 30% growth.
#9: "You're the only one for me" and "we're in the big time now". Bad things happen to people who promote themselves above their old friends and acquaintances. PZN has effectively stiffed its old circle of analysts, commercial bankers and investment bankers. There may have been expedient reasons for going exclusively with Lehman, but at crunch time PZN suddenly looked like damaged goods. BTW, is that Lehman credit line finalized?
We have hit the one the big problem when REIT's don't work, the price for new equity is not accretive any more. As this stage it's a bond, till the share price can increase and new equity can begin. Not a good situation for a growth company to be in.
Since we can not raise accretive equity at this time PZN has no choice but to finish up it's existing business and wait. CPV is in this boat too. Their share price has to be over $20 in order to issue shares.
PZN will be forced to curtail it's growth plans for next year, that seems quite obvious at this point.
NewMK, I must admit at this time the REIT strategy must go. The structure is not being accepted and the timing is not right. I still generally like the idea, but when it turns a growth company into a bond it's a failure. I can't support it when it drastically hurts the comapnies future as it is now.
Now the issues of competition from others and the anti-privatization movement become more real. What do the CCA salesmen say now when the Feds come knocking next year saying we're ready to go and PZN can't raise accretive equity. This is when I have to say it's time for a chance