IMO. Best information I can get is that institutions hold about 43% of PZN and management holds some. Institutions will make an unemotional evaluation of their options. As I see it there are two options -- 1. accept the deal on the table which will dilute stock, but raise stock prices somewhat from where they are; or 2. hope for another deal; no other deal is being presented. The real clincher is that in the absence of the Blackstone deal and with no other workable proposal in the works, BK would be a real possibility. Institutions may not feel that stockholders have been treated well, but they will vote for the best financial outcome available in a 12 to 18 month horizon.
I think we should start thinking about what to do when the deal is passed. That is, what's our best exit strategy -- how much will the price go up and when.
that the company could be forced into a better deal at gunpoint if they seemed not to have the votes for the Blackstone deal and BK looked like a real possibility. If company keeps building spec prisons while occupancy is problematic, perhaps even more dilution as Blackstone demands even better terms. Doc has been pretty intransigent, maybe we need to play the game his way and demand a better deal for shareholders.
conclusion that if this deal passes, the price of the common stock will rise?
Numerous respected posters on this board have presented detailed analysis of what this rape... I mean deal... would mean to the common stockholder. Their conclusions are almost universal; all possible upside for PZN's future would be transferred to the new preferred equity buying in, some of the present investors (the favored inside few) would get out with their wallets intact, and the common stockholder IRREGARDLESS OF THEIR COST BASIS would own a security going forward with no future.
As the years pass, all of PZN's future profits would be drained by payments to the new preferred owners. The dominance guaranteed to the new investors by board representation and voting rights guarantees that no change is ever undertaken to benefit the common shareholder- like resuming any common dividends or buying back any common shares. If this deal passes the common shareholder can look forward to YEARS of a dead investment with no income and no appreciation, and a management with a vested interest in seeing that it doesn't occur.
Any fool who would vote in favor of this deal might as well just get out his checkbook and donate his money, because he'll never see his investment again.
This is certainly the most uncomfortable part of the deal, but presumably it was based on some logical assumptions about future income.
In order to reach this 18% return, Blackstone must receive some stock appreciation in addition to the 12% coupon on their preferred. The 18% threshold would be satisfied by a stock price of about $8.50. That would mean about 15% annual price appreciation for buyers of common shares at the current price.
if I understand the 8-k correctly, the extra 6% would be potentially payable if the PZN stock DIDN'T appreciate enough. In other words, if after at least 5 years the stock hasn't appreciated enough, Blackstone can have the company redeem it at a price that kicks up the yield retroactively from 12% to 18%. CCA can also elect to redeem the stock on the same terms if for some reason it would be to their advantage and Blackstone hadn't converted.