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.
for your answer, glad to hear it's not as simple as SxD = P. I first bought PZN at 8.93 and have added to my position to and averaged down to 5.34. I'm in for the long run because I believe this company has potential.
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.
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.