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Corrections Corporation of America Message Board

  • tierradesol tierradesol Dec 26, 1999 7:39 AM Flag

    PZN dividend yield -Please Help me...

    understand why the dividend is listed at over
    $2.00 a share, a yield of aprox. 40%. Is the
    co.required to pay this because it is a REIT or will this
    likely be lowered?
    PS - I have no knowledge of REITS
    and would appreciate any info. and if you'r wondering
    why I'm here, simply because I am a value investor
    and REITS in general are looking very undervalued!

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • and RP, if it's legal for Doc to get a "going
      away present" in the negotiations, how can he
      represent the interests of the shareholders? Sorry, but
      that doesn't seem kosher, I think he has a fiduciary
      duty. Oy vey!

    • But I've seen the kind of scenario RP outlines at
      work before -- a "takeunder." It happened with two
      stocks I owned -- Telecopy, which I had bought at 8 and
      then averaged down at 4, was bought out by Xerox at 6.
      I broke even, but that's now why I invest. Then
      there was Convex Computer which I bought at about 7,
      and soon after was taken out by Hewlett Packard at 5
      or so. And to think, CCA used to be in the S&P
      midcap index!

    • I may sell 1/3 of my position from my taxable
      accounts - just don't know yet. My biggest concern is that
      if the Market doesn't do well next year and PZN does
      poorly and is bought out, forcing me to take a loss,
      then next year I might not have enough sufficient
      capital gains to write-off against.

      Perhaps I'm
      getting carried away and way off track, but I can see a
      scenario where the SI comes in at around $6 with a 40%+
      position, drops pursuit of REIT, investors just aren't
      interested, soft overall market, and the SI takes it private
      at $2 above the market. Then we're all forced to
      take all of our PZN losses that year.

      Scary,
      but I'd welcome anyone telling me why it's unlikely.

    • Don't know how long you've been following this
      board...I have been calling for PZN to drop pursuit of REIT
      status since Q1 conference call disaster when they
      revealed the new OPCO fees. Long story, but the net-net is
      they generate insufficent cash flow to come pay out
      95% of taxable income. I had given up on that
      prospect but with the supposed upcoming participation by
      the new SI I'm thinking PZN will pay the nominal
      remaining special dividend but then take actions (including
      shareholder vote) to drop pursuit of REIT status. I don't
      think any SI would want a REIT; this one anyway. They
      want the company put back together with OPCO, Doc and
      jr. gone and since they'll likely own 30-45% they'll
      get what they want.

      Hopefully, buying in for
      ~$6 a share they can make a go of it. If they aren't
      satisfied with the results, I predict they'll buy us out,
      perhaps bringing a few of the Institutional
      holders.

      I can't address all of your questions. Everything I
      know about REITS I've learned (painfully) with PZN
      from some good posters on this board. However, under
      the scenario outlined above, they wouldn't be buying
      any of the Preferred and they aren't a REIT anyway. I
      believe they can buy the common and just bring the
      Preferred along for the ride.

      Don't know about the 6
      qtrs/BOD issue or change in ownership trigger issue. Those
      sound like good protection.

    • the wall street journal has a section on stocks
      and there short position fron nov. 15 to dec 15....
      pzn went from appr. 400k shares short in nov. to over
      4mm shares short in dec...once something positive
      comes out on pzn and the short start covering, then we
      could have a nice run...a announcement will come this
      week and let's hope that it's POSITIVE..

    • There are some interesting twists to preferred
      ownership that might prevent the scenario you
      described.First no one can own more than 9.8% of the preferred
      and PZN stay a REIT (REIT rules). Preferred owners
      have the right to control whether additional preferred
      can be issued or authorized and whether new
      securities can be created which have distribution rights
      equal to or greater than the existing
      preferred.

      Also if dividends remain unpaid for more than 6 qtrs,
      the preferred holders have the right to elect two
      additional members to the BOD.

      If somebody tries to
      take this private aren't they obligated to make a
      reasonable offer for the common and preferred? In fact, I
      think that a change in ownership would trigger the
      liquidating distribution clause whereby preferred(full $25) +
      accrued dividends would have to be paid.

      In any
      case, they would have to go to a C corp if they took it
      private and chose not to pay the preferred dividends. To
      remain a REIT they would have to pay income dividends to
      the common and those can't be paid until the
      preferred is paid.

    • Thought about that strategy and considered buying
      the Preferred when it was under $13. My concern with
      the Preferred is if this thing plays out whereby our
      SI takes the company private, they may subsequently
      stop the payments on the Preferred. There is
      precedence for this, as the new owners focus on paying down
      the bond holders and bankers there is no incentive
      for them to remain current on the Preferred. Yes,
      it's cumulative but years with no dividend stream
      would be painful. It's happenned before.

    • PZN is in transitional period and we should have NEWS next week. At that time we should know about the dividend and the status of the company.
      Due diligence as always and good luck..

      • 1 Reply to mecosmo2
      • A $5 3/4 stock is tempting when you know it has
        sold at $40 in the past, and (supposedly) "has to" pay
        out a juicy dividend. But the company has been short
        on information, people have been kept in the dark,
        and the only assurance people get is that the company
        "intends" to qualify as a reit, and "intends" to pay the
        dividend. But we are getting stories and opinion out of
        analysts and "sources close to the company" that
        Blackstone may put in $300 mil, and (I believe) Litt said it
        may be as much as $500 mil. What is the new buyer
        getting for this money? Doc steps down, and that is said
        to be bullish. Currently, there are 118 mil shares
        outstanding, and Blackstone is paying how much a share? Or
        maybe high yield bonds with warrants? Or a convertible
        preferred that leaves present common shareholders out in
        the cold? Market cap of $680 mil and Blackstone is
        getting how much of the company for $300 mil? $500 mil?
        I'm tempted, but too many unknowns for me. Yes, I
        know, by the time terms are known, the stock may have
        moved higher, but I'd rather miss the first 3 points
        than buy blindly on hope and faith in Doc -- he's the
        guy who led us into this mess. It has ben a painful
        trip, I hope you all recover your investment capital,
        but I want to see how much Doc gave away in this
        deal, and what he and his associates are getting out of
        it. And how much of his personal fortune is tied up
        in PZN afterwards, and on what terms?

 
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