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  • flipper_58 flipper_58 Apr 19, 2000 3:31 AM Flag

    What your Special Div. might be.

    I think we have some time before any decisions
    need to be made. The key will be the cash flow off the
    prisons and the business, all the rest of this stuff will
    work it's way out if that's is what is meant to

    The $150mm (roughly $1.20/shr.)paid out in a PIK
    pref. will be "real" money as Frankwatermelonwine
    mentions. BUt of course the question is what will be it be
    worth when you want to sell it. The important thing to
    keep in mind when your given each of of these
    decisions is what is the comparable worth? In other words,
    if the pref A is yielding 17% then 12% new pref.
    won't be worth as much. I feel conversion to common
    will be our only option.

    The rights offering
    and the conversion period for the PIK pref. will have
    a reasonable amount of time to decide. IMO, if you
    choose NOT to add more money to PZN considering selling
    the rights early.

    Of course all of these
    crazy options PZN is taking are forced. PZN has no cash
    so they must give us "paper" instead. The IRS does
    not allow PZN to pay in common stock because it has
    minimal par value or redemption value. Pref. Stock does.
    Conversion to common stock windows like PZN has set up are
    ways PZN can quickly get get the pref. off it's
    balance sheet. As I explained earlier why, everyone knows
    a 12% yield on it is not a "fair value" and opting
    out quick is probably the better route.

    If you
    are a really long term investor that does not wish to
    commit more money this is what I'd do. Sell your rights
    in the first few days, convert your PIK to common
    when given the window and forget about your shares for
    5 years. The rights offering and the conversion of
    the PIK, IMO, will leave this stock dead for awhile.
    The sheer amount of new shares coming out will be
    very large and be a big over hang through a lot of
    this year. The stock certainly could go into the $2
    area, maybe lower, who knows. If the right offering
    came tomorrow the price would be $2.19 and that would
    be 91mm shares. Add the expected conversion of
    $150mm from the PIK pref. at say $3 and that's another
    50mm new shares into the market place. PZN has 120mm
    shares or so now. SO that's 141mm new potential shares
    coming into the market place this year. PL also gets
    warrants on 10% of the company too. It's going to be hard
    to keep up with the amount of shares coming

    One option if you own a good slug of stock already
    and want to buy more, think about the pref. A
    instead. Sure the upside is limited, but if you look at it
    as a part of your whole PZN investment you'll be
    earning(hopefully)some income off of your investment in the next few
    years. If you have 2/3's in common and 1/3 in the pref.A
    your average return will be 6%( the pref. is about
    17-18% yield) on all the invested money. Also the pref.
    A is not effected by future dilution.

    I know
    some think I'm too bearish but I'm just trying to be
    ojective. A rights offering has a ex-date just like a cash
    dividend. The rights will trade when-issue for a few days
    prior to going ex. If everyone gets two rights per
    every three shares owned and the common is at $3.375, a
    excerise price will be $2.19. So what's the right worth to
    go ex.? If the stock remains unchanged then the
    intrinsic value of your rights is $3.375-$2.19=$1.19/2 or
    $.59 a peice. If it took one right to buy one share
    then the stock would go ex. $.59 to roughly $2.75. The
    rights trade on their own and relative to the common. If
    the stock moves to $3, the right would be worth $.81
    ($3-$2.19) If the common moves to $2 1/8 the rights will
    trade for almost nothing. Plan on it going to $2 1/4 to
    $2 1/8(or the exercise price what ever that is)
    IMO...I'd tell you in more detail why it will but I don't
    want to give my trading strategy away on these
    things...don't need the competition.

    I'll keep trying to
    explain this stuff as best I can, it's not easy keeping
    up with it. I'm following it because I think there
    is a good buying opportunity coming up.


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