There is an informative website for investors (www.nordby.com) which provides very short capsule summaries of all available brokers' reports on any stock you are interested in. The most recent posting on PZN was as follows:
3/26/99: Paine Webber "reiterates attractive, hold unexpected conference call, expect bounce".
Due to certain aspects of the Company's relationship with CCA, the Internal Revenue Service (the "IRS") will not consider the payments that the Company received from CCA under the CCA Leases to be Rents from Real Property. First, the IRS will recharacterize the CCA Leases as service contracts or partnership agreements, rather than as "true leases." Second, the application of the Code's complex constructive ownership rules, together with the failure of the Ownership Limit contained in the Company's Charter to prevent such constructive ownership, will lead the IRS to recharacterize CCA as a Related Party Tenant. In either event, based upon the amount of rent payments received under the CCA Leases, the Company will not satisfy either the 75% Income Test or the 95% Income Test and, as a result, will lose its REIT status and default on its loans.
Indeed, Flipper, I'm focussing on the fundamentals, and all of them point to a bright future for PZN. The only question I have is how they will finance all these new prisons they're building. Equity? Debt? Half and Half? The last balance sheet I saw showed a pretty conservative debt/equity ratio, something I like (just look at Loewen Group implode under the crushing weight of its massive debtload). Will the new financing required dilute FFO per share?
� Forber Magazine article titled "Discarded Values" (11/16/98): considers PZN an undervalued stock�."sales are expected to nearly double in the next two years to $900 million."
� Value Line Reports on CCA (reports dated 9/18/98 & 12/18/98): very positive reports on CCA and very positive comments about the merger with PZN. Value Line is not in the investment banking business so their reports are considered to be more unbiased, independent, and objective than the reports of brokerage firms.
� PZN is the largest private prison operator in the U.S.
� In a recent article about crowded prisons (3/17/99) it was stated that "private prisons should continue to show 20 percent to 25 percent revenue growth annually, even though the industry has slowed recently due to investor nervousness over mergers, public oppositon and other political factors".
� At the present time private prison operators, as a whole, control less than 4 percent of the country's jails and prisons in the U.S.A. so there is significant and substantial growth potential beyond this point.
� The nature of PZN's business is such that PZN often uses the investment banking services of several brokerage firms who, through their positively-biased stock reports, can be "cheerleaders" for the stock.
� Estimated 3-year FFO growth for PZN is 15%. With earnings (FFO) for this year estimated to be around $2.64 and a growth rate of 15%, PZN warrants a stock price of $39. Looking out ahead two years from now (Fiscal year Dec. 00) its earnings are estimated to be $3.00 which would justify a stock price of $45.