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Corrections Corporation of America Message Board

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  • grunka grunka Apr 7, 2000 2:07 PM Flag

    Blackstone's $22.7mm in fees not so bad

    , I understad that, and love PL for comming to our rescue. But don't understand how many shares of preferred stock i will get for X amount of common shares.

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    • The number of preferred shares is irrelevant.
      They will have an aggregate par value of at least
      $150mm and an unknown market value per common share that
      you have now. You will also get some rights. However,
      nobody can say in advance what any of this is worth.
      Further, others on this board have noted that the value of
      the common generally drops by the value of dividends
      paid, once the ex-dividend date is reached. In other
      words, the market is currently impounding the estimated
      value of any payout (preferred plus rights) into the
      price of PZN right now.

      If you are asking me
      whether you should hang on to get the dividends or sell
      now, I do not know. I will hang on, not for the
      dividends, but because I believe PL can save PZN from
      failing and realize the potential value of PZN's assets.
      All that has nothing to do with
      dividends.

      Forget the dividends. What counts is the value of PZN a
      year from now. Your decision to sell now or hang on
      should be a function of your estimate of that future
      value.

    • Lets try and take a logical look at what's going
      on. FIRST The $200mm rights offering would probably
      DOUBLE the amount of shares outstanding. If PZN earned
      $1...it's earning $.50 per share now. THEN, PL gets another
      20% AND the PIK which will convert to common might be
      another 50-75mm shares. THink about it, the shares
      outstanding fully diluted might TRIPLE. Then what about
      OPCO's shares. IF PZN earned $1...it's now earning $.33
      on a fully diluted basis.

      Second, the rights
      offering is 65%....or A 35% DISCOUNT to a MAX of $4.. IN
      OTHER WORDS the MAX the rights price will be is
      $2.60/share. Now let me explain AGAIN what happens in a
      transferable rights offering. WHo do you think buys those
      rights you want to sell if you don't want to add? Arbs.
      They buy the right and sell the common in the same
      breath. In fact, the underwriter does the SAME thing.
      Guess what that does to the stock? If you guessed it's
      most likely the stock will drop to the exercise price
      you are right. Here's a tip, if you plan on selling
      your rights instead of exercising them, sell them VERY
      soon. Why do you think PL fixed OUR rights price at the
      beginning and theirs at the end?


      Third, almost
      ALL stock is overhead. All those that missed
      $5,6,7,8,9.....are waiting for their chance.

      I think people
      have to be realistic on what the hell is going on
      here. You've got the founder of the company unloading
      at $5, that means something.

      • 1 Reply to flipper_58
      • You said: "If you guessed it's most likely the
        stock will drop to the exercise price you are right".
        If that happens, then the rights are obviously worth
        ZERO, so the arbs will have nothing to buy, because
        nobody will bother selling for zero.

        You can not
        predict in advance what the stock price will do. I
        believe that the major negative impact of the rights
        offerring will be the decline in the common value on
        ex-rights day, where we know that the intrinsic value must
        fall by the value of the rights. However, given the
        volatility of this stock, that may not be a noticable
        effect.

 
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