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Corrections Corporation of America Message Board

  • greed_vs_fear greed_vs_fear Sep 26, 2000 8:30 AM Flag

    Considering purchasing PZN

    Can someone PLEASE explain the terms of the deal
    and EXPLAIN why I should buy today vs some other
    date? I feel that crime is a growing industry, and that
    the problems PZN has had will turn around, QUESTION
    FOR ALL-WHEN DO I BUY, WHAT PRICE AND WHAT MIGHT BE A
    REALISTIC UPSIDE TARGET???? Thank you in advance for all
    responses.

    GvF

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • One nice thing is that we have two weeks to make
      the decision--hopefully there will be new
      information. I'm also hoping there is a way to know how many
      shares are converted as we move along--at least by the
      end of the first week. I have been one to speculate
      that the price may be higher the second period. It
      would be great if the quarterly or some hint of it gets
      put out ASAP. I simply can't tell if the current
      price is anywhere near an accurate representation of
      the value. The amount of market cap lost is huge--it
      is possible that it has been overdone due to all of
      the credibility issues. The possibility of news still
      exists, though lessesn daily IMO.

      I'll be doing
      some math over the next couple of days. I want to
      figure some "what if" prices for the second conversion,
      ie how many dollars I stand to gain or lose by
      converting now vs December. Another consideration is whether
      the overall market is bottoming--we should have an
      idea of that this week. If that is the case, then
      failure to jump in on other stocks now may be more costly
      than waiting for a better price on the second
      conversion.

    • pkn4mom, I think option #3 is the best by far.
      There is a good argument for converting, immediately
      selling the common and putting the proceeds somewhere
      else. I don't know which conversion period will be the
      best but I suspect it will be the later one. Some have
      speculated that the price may go up during the second
      period(and the conversion ratio would then be less
      favorable). I don't think that is true because the price has
      already been adjusted down for the dividend and it will
      come under increasing pressure as many convert and
      immediately sell to recover what they can of the dividend.

    • You're right, I was assuming that the company
      would redeem the B as soon as possible, but I see where
      that may not be the case. Don't forget option #3--put
      the money somewhere else. There's some great bargains
      floating around lately.

    • Have to admit I missed your point when I first
      read your post. But it's true. For the next three
      years the B return will be 12% no matter what price it
      sells at. This probably makes moot any discussions of B
      as an investment after the conversion periods
      expire. There will be so few remaining that a reasonable
      market for them will probably not exist.

    • "Using your figure, If I buy the B at 8, I will
      realize a gain of 200% plus the dividends in 3-6
      years."
      I think that it is a misconception to assume that
      either the B or A will be redeemed someday in the
      foreseeable future. Redemption is not required, it's just an
      option the company has. So the only thing left is the
      dividend(if paid). Since A is senior in both dividend
      payments and liquidation rights, it seems a "no-brainer"
      to buy the A instead of the B if one is considering
      an investment in PZN preferred.If you already have
      the B's,conversion is the only way to go. Then the
      decision is whether to sell the resulting common and buy
      the A's or to keep the common.That decision is not so
      clear to me at this point.

    • The pref B will trade relative to the common
      until Dec.20, after that time it is not convertible
      into common. On Dec. 21st the pref B will trade
      relative to it's closest cousin, the pref A. which yields
      30% cash div. as it is NOT paying a dividend. It has
      $.50 of back div..

      The problem with a PIK like
      the pref B is valuing versus other investments.
      Here's why. The pref. B will ALWAYS (in the next 3
      years)have a 12% CASH yield. Look at the math....if you buy
      100 shares of the pref B. you will get 12 shares a
      year div.. If the price is $12 your 12 shares is worth
      $144....divided into your orginal investment of $1,200 that's
      12%. The numbers work the same at $8 or $5. That's why
      is a very good possibilty the pref B could drop to
      $5 or lower. Needless to say you don't want to miss
      any conversion periods.

    • Good point, but, the next big news should be the
      quarter earnings release with everything wrapped into on
      set of financials. They didn't need to boost the stk
      price with good news as the price with div. took care
      of that for the first conversion period.

      I
      felt the price increase was strange also. Maybe good
      news. I bought some "trading stock" today as I feel
      price will bounce around for the next month. Possible
      to knock off 1/8 or so every other day. Thats 12.5%
      on $1. Price may settle as more people day trade on
      it.

    • NoonanGF, did you take my suggestion to day trade this stk? I played with it today and bought some at 7/8 and got out at 1 3/16. At these prices a nice gain can be had with a 1/8 bounce.

    • Is that based on the adjusted ten day average closing cost?

    • Without getting into the semantics of
      "instrinsic"...

      Blackrock--I'm not at all dead set against converting. I plan to
      convert near the end of this period unless I get new
      information that causes me to reconsider.

      My point was
      that I think its possible that the long term
      investment value of the B will prompt a floor that is higher
      than its conversion value relative to the price of the
      common. Using your figure, If I buy the B at 8, I will
      realize a gain of 200% plus the dividends in 3-6 years.
      Even at 12, I will gain 100% plus dividends. So even
      if the common goes below $1, I don't think it is
      safe to assume that the B will drop in
      sync.

      Unless the company goes into BK, I personally don't
      anticipate the common going below $1 for any length of time.
      I also think that there is a greater chance that
      the conversion price for the second period will be
      higher than it is for this first one. I sure don't want
      to argue this as unquestionable, but this has been
      an unexpectedly good week for the common IMO.
      Today's late buying was interesting. Do you have any
      ideas on why it happened? If anyone did have the guts
      to short PZN pre-ex, then I would assume they had
      limit orders in to buy last Monday. I can't think of
      any reason to have bought today except on valuation.
      IF that is the case, and IF there is anthing close
      to an accurate amount of dilution already built into
      the price of the common, then I would call the move
      very significant.

      We got one bit of good news
      this week--I had hoped there was more. Do you think
      it's possible that they elected not to release too
      much information for fear of being accused of trying
      to manipulate the conversion price? Who knows what
      to think.... Time will tell for all of us.

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