I'm sorry I seem to be picking on you, I don't mean too but as blackrock says...some folks seem to be taking your advice to possibly hold the pref.b because it takes less thought and is easiest. Holding the pref. B versus converting is NOT an option and NO ONE should even consider it. The orginal $24.46 dividend has already declined 25%. It will decline easily 75% by mid Janaury of 2001. Your ONLY chance to save your orginal $24.46 is to convert in the second round and sell ASAP. Conveting now will not make you whole on the dividend since the common is a $1 and the conversion price is $1.48.
I'm not offended. I read your intentions as sincere and your opinions as being what you believe to be in everybody's best interest. But I disagree with your position of certainty regarding what's going to happen over the next few months. I'm not saying that I think you're wrong--it's a logical and quite possible scenario--but if I've learned anything here it's not to expect the expected. I'm converting this time. If your theory plays out, then I can repurchase some B before December. But I don't want to miss out on the chance that the common will have reason to go above $1.48 before then. If I'm wrong, then I'll just have to wait longer--or I can sell the common. You said that you sold your B shares @ 18. By converting now, all I need is a common price of $1.09 to get the same deal that you did. Point is, everyone has to make an informed decision based on their own perspective.
I hope you meant that you will repurchase B's before December and convert them during that December conversion period. But if that is the case why not just hold the common and save some brokers fees or wait till the second period to convert?
The arbs action is baffling at the present. Best I can tell they're betting that the price will go below $1 during the second measurement period. If the common price stays about where it is today or goes up then the second conversion is worth much closer to the $24.Only if it goes below $1 is it worth less than $24.
I sold some pref. B at $18 that I had bought at $16. I have not owned any common for a long time. I am actually short a lot of common that I will convert the rest of my pref B shares to cover my short postion. My feeling is the next conversion price will be lower than this one.
Each day the pref B trades more stock this represents more shares for sale since anyone paying this present price most likely will convert. Today 9,200 shares of the PIK traded....this represents 225,000 new share created today and these shares will be for sale most likely. Since trading regular way 2.25mm new shares have been created by pref B be sold, if the conversion is $1. This is a BIG over hang.
The arb ratios are fairly easy. You can even buy the pref B here and make a few bucks on the conversion at this level. If you pay $18 for the PIK you will receive 16.6 shares. Selling 16.6 shares at $1.125 gives you sale proceeds of $18.675. I'm holding out though for the second period....this is just a guess. But see why it's going to be hard for this stock to make a run with this type of stuff going on? It's not evil, because without this activity there would be NO buyings of the PIK even close to this level.
Interesting dialogue. Each have merits and I'm trying to select the best of these options. FWIW, I wont keep the B for long term "income". I've already gone that route with PZN, from the 20's down to bedrock! Therefore I will be converting. When? Here, I guess I'm still optimistic, in that I feel Ferguson will come out with enough good news to push CXW up over $1.50 by December. Hence, it's now for me! Should I change views and decide to go for long term income, I agree with Flipper and would choose the A. But that's unlikely th way I am thinking now. Bottom line, my action plan is to convert this week, with the hope that I can finally get something right on this elevator ride! Good luck, however you choose. May we all end up ahead of the game, sooner rather than later. Thanks to all contributors for your views and input on this conversion. A great example of how a board should be an information source for serious investors.