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Corrections Corporation of America Message Board

  • storthis storthis Sep 19, 2000 10:58 AM Flag

    Conversion

    I own 2300 PZN. I understand that I will receive
    5 shares of preferred B for every 100 shares of
    common I own. 23 x 5 =115. Using todays news release and
    $2 as average trading price they calculate the
    conversion to reap 12.2 shares of common for every B
    converted. 115 x 12.2 = 1403. Gomer would say, " gaaaalee.
    Can someone confirm?

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • plus the $70mm for the class action suit in shares...plus the possible $100mm rights offering by year end......plus the......

    • You have to factor in the merger (dilution plus added value if any) and the service companies. Makes my head spin.

    • First, you are assuming that the current price
      reflects actual value. We have no way of knowing that.


      Second, the higher the price goes during the week of the
      25th, the less dilution there will be--it could all be
      a wash as far as market cap goes, but I'll bet
      there will be buyers @ .75.

    • If PZN is $.75 during the conversion period that
      means it is roughly UNCHANGED from today's $1.75 price
      PRE-dividend. It's looking like the common will go ex-dividend
      $.80-$1.00 which means the price will be reduced by that
      amount on ex-div. date.

      PZN has roughly 120mm
      shares out. If all PIK shares convert at $.75 there will
      be 165% MORE shares added.....5,980,000*$24.46/$.75.
      That is 195 MILLION more shares.

    • Though I should add (I'm thinking too hastily
      here) that anything is possible, so I'm trying to
      prepare for all events :)

      It seems to me that the
      least risk for those interested in a short term play is
      to wait and buy ex-dividend.

    • storthis, as far as I can tell, your math
      is
      correct.

      Valuewise, before conversion you have

      2300 * 2 = $4600. Afterwards, you have 3703 * 1 =
      $3703 (not including conversion commission).

      • 3 Replies to weibin_98
      • First off...it is HIGHLY unlikely that the price
        will be $2 at conversion more like $.625 to $1 MAX,
        IMO. Because it will be EX the dividend at that
        point.

        Second you pay tax on a dividend of $2,813 or
        2,300/20x$24.46, but the present worth of the PIK shares, if you
        could sell them at this level is $1,840 (155x$16). The
        bid is for 100 shares at $16. Realsitically the
        buyers are much lower.

      • "Valuewise, before conversion you have
        2300 *
        2 = $4600. Afterwards, you have 3703 * 1 = $3703
        (not including conversion commission)."

        Your
        calc illustrates the insanity of including any "with
        dividend" days in the period used to determine the
        conversion price. Maybe better to wait until the December
        conversion period. Anyone?

      • First off...it is HIGHLY unlikely that the price
        will be $2 at conversion more like $.625 to $1 MAX,
        IMO. Because it will be EX the dividend at that
        point.

        Second you pay tax on a dividend of $2,813 or
        2,300/20x$24.46, but the present worth of the PIK shares, if you
        could sell them at this level is $1,840 (155x$16). The
        bid is for 100 shares at $16. Realsitically the
        buyers are much lower.

    • You got it, Storthis. BUT, you will pay tax on
      the dividend and then if the price of the common
      falls ex-dividend and then doesn't come back up your
      overall value will be less than it is now. The dividend
      is causing big time dilution, and nobody really
      knows the value of the company. Good luck.

 
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