This companies very existance stems on getting a
cash infusion which is hopefully being provided and
you are suggesting a stock buy back? Investors will
have to put in additional funds to avoid dilution.
Where do you think the money would come from to buy
Have you been following the events
surrounding this company???? Do you live on this planet???
pardon me if I seem dense. You have 1,250,000
shares and you are trying like mad to talk the stock up.
You plan to oversubscribe, meaning you want to buy a
hell of a lot more stock. Why do you want it to go up
before you are positioned? Don't you want to buy it
The info. was provided by PZN PR
Rights offerings are tricky certainly and by no means do
they HAVE to pressure the stock as you say but look at
these facts. The price will be set PRIOR to the 30 day
offering window. Let's use today's price for example,
$3.375. We will know before we have to make a decision to
buy what the price will be . In this example it would
be $2.19/shr or 65%. To raise $200mm that equals
91mm shares and 91mm rights distributed (potentially
sold) to each shareholder. Now PZN trades on average
500k share per day according to Yahoo's profile page.
Since the rights offering range over 30 days or 20
trading days that represented 9 times PER DAY it's
average trading volume of new shares trying to be sold.
If there are 500k of natural buyers that means there
are 5mm shares of new shares for sale for every 500k
in buyers. Certainly the volume will pick up and
certainly more buyers will come out. But I mention this to
illustrate the pressure rights offerings cause and why. I'm
not trying to be bearish on the company or to create
panic. I'm just trying to objectively look at the
situation as I have experienced these deals
The fact that the rights are priced prior to the
rights offering is why I feel the rights will be always
worthless by the end of the rights period. I think it's
smart from PZN's standpoint because, IMO, Arbs would
push this stock a lot lower if they the pricing was at
the end. In 1996 I bought a rights offering (PPR)
they set a 10% discount at the end and the Arbs pushed
the stock down 25%. PPR is a prime rate loan closed
end fund with expected minimal NAV variance. I hope
for PZN's stand point they can get the common up
prior to the rights offering. I have a feeling the
ex-div. on the special div. will play a role. One way to
foul up the Arb's is stick an ex.div. on a weird peice
of paper in the middle.
I guess my post was unclear. I was not using
hyperbole. I really do believe that the issuance of rights
and Pref. C has a net value of zero to current
shareholders (except that the capital raising function helps
the company). This is different from saying that
after issuance the rights and Pref. C will have a
market value of zero.
What I am arguing is that
common shareholders of PZN should not see the rights and
Pref. C issuance as a "valuable" payout. Look at it
this way. If you own a common trading at $3.50 and the
company announces a 2 for 1 stock split, you would not
jump for joy and say, "Oh my, I'm getting stock worth
$3.50!" nor even "Oh joy, I'm getting stock worth
In fact, the split does give you stock
worth $1.75 in that example, but it obviously also
reduces the value of the stock you already own by $1.75
per share. That is for the simple reason that you own
the same proportion of the same company both before
and after the split.
That is the sense in
which the split is worth nothing. Obviously the new
shares have value, but only as much value as they take
away from your existing shares. So the "pay-out" is
worth a net of zero to existing shareholders.
the case of the PZN rights and Pref. C, the "pay-out"
is actually a "pay-in", because it forces us common
shareholders to pay cash to the company, just to retain our
current percentage ownership.
"It's my understanding the
and the div. will not come until
shareholder vote on the OPCO
merger this summer. So there
is plenty of time."
I think the 8k says the
PL transaction is expected to close by 6/30. I think
that means the rights offering will be done by then.
The sooner the better for everything. We should get
more clues as they push through the
I don't agree that the rights offering has to
depress the stock. It's like an IPO or a secondary. The
problem would be if the common gets stuck trading below
the rights offering price. Then the offering price
would become strong technical resistance. On the other
hand if the offering is a success and the stock trades
higher then everybody's happy.
Yes you may sell them through your broker. They
will trade like a stock.
A couple more things.
It's my understanding the rights offering and the div.
will not come until AFTER the shareholder vote on the
OPCO merger this summer. So there is plenty of time.
PL is only a backstop on the rights if the merger
goes through I believe. So it could be August before
the rights offering is completed.
It's also my
understnading the PIK will be set up with 2 conversion dates (1
month and 6 months I believe) to convert to common. My
guess the terms will make it so you almost have to
convert, IMO. CMM did theirs the same way, it's their CMM
pref. F if you wish to investigate yourself.
If you can get 85% of the common price for your
rights, sell them all and then sell more short. A market
price will be quoted for the rights, and flipper is
arguing that the price will slide down toward zero. I
believe that the rights will allow you to buy the common
for 65% of the average common price over some period
preceding the issuance. Therefore, the rights would be
worth about 35% of that price. However, flipper
predicts that the common will gradually decline to the
rights exercise price (65% of the previous common
price), which would leave the rights worthless.
Flipper: What would be the consequences of not
exercisizing the rights offering. Persumably I can sell them,
but through what mechanism? Do I just tell my broker
that I wish to sell them at some price (say 85% of the