I too find it interesting NO ONE has made any
comments on the upcoming dividend and how to deal with it.
We all must remember the stock will open less the
expected dividend amount too and have buyers to bid it
back up to the closing levels of the night before, if
Also $145mm converted to the PIK
then to the common roughly equals 72mm NEW shares,
increasing the shares outstanding by greater than 50% if at
$2. The company can't come out and say it but those
that don't convert will be screwed. So as usual the
little guy who does no homework loses in the end.
I like your thinking. Hopefully for all us longs,
it will not be "wishful thinking". Next week will
tell. If the new board does NOT throw out some good
news on 9/12, we could be in trouble. Good news could
compensate for some of the expected record date selling.
I won't be buying the Pref A simply because I
don't want to make another long term commitment to the
company. I'll likely convert my B shares for the same
I fully expect that on or after 9/12 the company
will provide as much information as possible to
justify a higher price on the common. It'll be in the
best interest of the company to have the price as high
as possible at the conversion windows (and longer
term for the lawsuits). If the information is
convincing, and it well could be if, as I suspect, there are
some strategic rabbits in the hat, then we won't see
an "ugly Tuesday". I wouldn't short this stock at
all in anticipation of the conversion--to do so is to
place a bet against brand new management that is under
the gun to turn this company around.
""If the common is $1 then do I end up with 5 *
24.46 = 122.3 shares of common? Plus my original 100
common shares = 222.3 shares? ""
You math sounds
correct as I see it.
In my calcualtions earlier
for the amount of shares issued (fully diluted for
the pref B) I forgot the drop in the price of the
stock for ex-dividend..thanks...$145mm converted at $1
equals 145mm new shares. Increasing the float
OK. Lemme see if I gots this
Assume I have 100 shares PZN in my Roth. Since I have
been holding for awhile I am owed dividends which they
promised to pay in order to qualify as a REIT.
Friday, September 22, 2000 I will receive 5 shares of PZN
Pref B with a stated value of $24.46. This squares
them on the REIT requirements for 1999.
convert my 5 B shares to common shares during two periods
(one in Oct and one in Dec). If the common is $1 then
do I end up with 5 * 24.46 = 122.3 shares of common?
Plus my original 100 common shares = 222.3 shares?
Does this sound right???
And then they will
restructure into a C corp which likely won't pay any
dividends at all. I agree with those saying that converting
is the way to go. I am no expert but the content of
this thread has been excellent! Bravo everybody.
You know what my plan has been based on previous
posts. However, given my common is held in a taxable
account, I now think I should sell th eremaining 2000
shares and take my tax loss rather than compounding my
tax problem by receiving the Pref.B.
Any other opinions out there or does everyone
agree the preferred B should be converted into common
during one of the two windows and not held . I propose
the Sept. 12 meeting/ex-div be referred to as 'Ugly
Tuesday' as there could be a whole lot of shorting/seling
going on no matter what happens at the meeting.
opps clicked too soon...still
Lets look at the REAL yields at different prices. In
theory the yield claimed is 12% of the par value $24.46
or $2.94/share. So in figuring a fake yield you use
$2.94 (that's what will be quoted). If we put 23% on
the pref B, that equals $13 per share. BUT in reality
at $13 per share your getting a 6.3% return on your
1,000 shares of pref B.(120x$13). THE ONLY WAY TO GET
HIGHER THAN A 12% yield on the PRICE OF THE PREF B. is
to have the price go OVER $25/share. Do the
Now the bond debentures pay 15%...so the pref B
should be at least 18%. To get 18% the price of the
pref. B would have to be $36/share. 120x$36/$24,460.
Talk about a sucker set-up.
ALL of PZN's paper is high risk. The point I've
been trying to make is a 12% PIK pref. B worth 12%? We
both agree it is not. PZN fortunately gives you a way
out with the conversion.
Also the yield on the
B will be far less than 12%. Here's how. With a PIK
you get more shares of the same thing you own. If you
have 1,000 shares of the B pref. trading at $15 your
actually yield is a lot lower since you are getting 12% of
$24.46 NOT $15. For 1,000 shares you will get 120 shares
in a year, 120 shares sold at $15=$1,800.
$1,800/into your orginal cost $24,460=7.3% return on your
investment....the pref. A is crappier?
Sure you could say in
5 years the pref B. with go to $25 and all shares
will be "fair value". But if the shares go DOWN
further your actually return drops even more than the
7.3% you'll earn now.
Both preferreds need
the company to survive. If it does, with the pref. A
you'll get all your back dividends in CASH and have a
piece of paper yielding 28%. No comparison in my mind.
If the preferred 'B' is a crappy piece of paper
doesn't that make the preferred 'A' a crappier piece of
paper. For example if the 'B' is priced to yield 20% or
around $15 wouldn't that limit the 'A' upside to about
$10. If 'B' yields 15% than 'A' around $13. Or in best
case scenario with a successful turnaround 'B' yields
12% and 'A' is priced high $16. Second, I understand
why the 'B' should trade at a large discount from par
of $24.26 but doesn't the conversion rights have
value? I just don't see the 'B' selling for $15 if it is
worth $24 of PZN stock irregardless of PZN stock price.
Maybe todays lesson should be how to exploit the
This discussion is largely over my head, but one
Is it a certainty that PZN will meet
requirements for REIT tax status via these instruments, or
will even these leave room for doubt? The August SEC
filings indicate that the company is uncertain about
qualifying -- or about electing to qualify.
remains uncertainty, how will it affect the future
details now under discussion?