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Corrections Corporation of America Message Board

  • flipper_58 flipper_58 Sep 5, 2000 5:28 PM Flag

    toptalk99

    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
    they appear.

    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.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • 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
      reason.

      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
      120%...OOOOOf.

    • OK. Lemme see if I gots this
      straight.

      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.
      On
      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.
      I can
      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.

      Thoughts
      please.

      WC

    • 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
      babbling...

      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
      math.


      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
      confusion.

    • This discussion is largely over my head, but one
      question arises:
      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.
      If there
      remains uncertainty, how will it affect the future
      details now under discussion?

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