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Corrections Corporation of America Message Board

  • justmyview justmyview Apr 17, 2000 3:22 PM Flag

    Stock Buy Back - Excuse Me?

    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
    back stock?

    Have you been following the events
    surrounding this company???? Do you live on this planet???

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • If PZN goes to $5 by rights date like it should, then I may not oversubscribe. IF it
      remains severely undervalued here, then
      by all means, I will gobble like a turkey.

    • 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
      cheap?

    • The info. was provided by PZN PR
      department.

      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
      before.

      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.

      JMHO

    • 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
      $1.75!".

      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.

      In
      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
      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."

      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
      paperwork.

      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.

    • Bigman sees PZN at $12 in 2001....

      Bigman
      says "buy now and be rich".

      Bigman says, "avoid
      the negativity here".

      Bigman says, "seize the
      day"

      Bigman says, "reap"

      Take care HERB

    • Anybody got any guesses as to when I will need to pony up some money to keep my stock value and how much it will cost? FWW

    • 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
      current price)?

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