I posted earlier that most thought converting was the way to go. I'd like to retract that statement. Opinions seem to be all over the map. I am at a loss as to what to do. I figure many are in my position. You all or most are posting well thought positions and I feel like I'd have to study nearly every post for ten minutes to get a better understanding. I'm not sure I want to invest that kind of time. So upside down on this that I tend to turn a blind eye and just let the chips fall where they may. Rarely find myself in this position with investments. You must admit this has turned into a mess to say the least. Well I strongly applaud this board and just may and should deeply study this over the weekend and then I'll at least be able to formulate an opinion of my own instead of just blowing in the wind.
I'm glad to learn someone else is as puzzled as I after studying the posts. I'm sorry to say that even if I studied all weekend, I probably still would not know what to do. Would you be kind enough to post your decision when you reach it with a short explanation. It would sure be of help to some of us with very little sense about what's going on.
#1 sell the common before the dividend is paid and establish a tax loss for this year and receive a tax reduction which saves real cash in April 2001..... then PURCHASE the pfd B at 90% of face value when it starts trading on Monday,Sept 25 with the intention of converting the pfd B into common during the second conversion window starting Dec 7 and ending Dec 20. You will then receive common at the lowest price plus buying back into the common using the discount when you acquired the pfd B.
#2 buy the common now while the due bill is attached with the intention of holding the pfd B shares and converting into common during the ten day conversion window starting Dec 7 thru Dec 20. This is based on the belief that the common purchased with the due bill attached today will be purchased at a price that will be lower than the value of the two pieces held on Monday,Sept 25, when the pfd B will be separate from the common shares and will then together have a higher value.
#3 Do nothing at this time and keep your head in the sand and accept what ever happens and hope to recover in the next 5 to 10 years. After all management owns 30% of the shares and institutional professionals own 30% of the stock. Therefor the Company has intelligent investors interested in making PZN survive and prosper.
#4 When the common stock hits a low price during the conversion periods buy common shares equal to the number of share you hold. Then 31 days later sell the original common shares that were purchased at a high price to establish a tax loss. (you need to hold for 31 days to avoid a wash sale per IRS regulations). This way you establish the tax loss and get immediate cash benefits but still save your position if you belive that over time the stock will recover in price based on the potential value of the real estate (prisons)owned by the Company.
Shorting the pfd B is out of the question until the second conversion window is concluded as the pfd B is not trading on the dividend yield (as compared to the pfd A) but on the right to use the face value of the pfd B as payment in full to receive common shares during the conversion window period. This will prevent the price of the pfd B from falling in price and the price will stay within 90% of face value until the conversion window closes.
After the conversion window closes the pfd B will trade at a huge discount from face value, possibly as low as 50 % of face value for a period of 2 years until the Company can rebuild its earning power and begin to pay cash dividends to the pfd B.(rather then dividends in more pfd B shares as now stated)