Hope some of the oldtimers occasionally are lurking.
What's Happening: Corvex Management and Marcato Capital Management formed a group to encourage Corrections Corp. to convert to a real-estate investment trust.
$75 to $100 million: potential estimated annual tax savings to the company by converting to a REIT
13 to 17: the multiple to adjusted funds from operations that REITs typically trade at
$45 to $55: the estimated stock price of CXW in a REIT structure
Behind the Scenes: Corvex was founded by Keith Meister, a former lieutenant of Carl Icahn. Marcato was founded by Mick McGuire, a former lieutenant of Bill Ackman.
Corrections Corp. was a portfolio company of Pershing Square when McGuire worked there. What is different now is that legal and business developments have made converting to a REIT easier than in the past. Corvex and Marcato believe this can be done "without material disruption or changes to the issuer's current operations," which likely means without separating Corrections Corp. into two companies.
Both Marcato and Corvex are deep-research and analysis investors, and if they think it can be done, it likely can be. Now, they'll try to convince management. Their style would be to work with management to implement structural changes, while leaving operations to management. But if management ignores or resists their overtures without good reason, Meister and McGuire have experience in all forms of shareholders activism, including proxy fights.
-- Kenneth Squire
Memo to Messrs. Meister & McGuire: call me.
Memo to Doc, Jr: call them.
My state is letting out 10% of prisoners early because of budget cuts.
30 years of tough on crime is about to reverse not just for economic reasons, but also because of our new leadership.
For carlino, my own feeling is that there will be increased social unrest because of the recession, followed by potentially more significant unrest caused by unmet expectations.
just keeps getting older and has degenerated into a "lurker". I think us old guys go back about 10 years (probably more - I think they did the first REIT in 97) on this thread. What I lost in stock value over that period I more than gained in granddaughters.
Yes, Doc was a visionary, among other things (but not my illegitimate father, as the general has occasionally intimated).
But I'm always flattered to be mentioned in any way with the general and you other long-suffering posters!
yes, it was fun in a demented sort of way.
Now that I know you were TU, things make a little more sense. The General had surmised that the TU was code for another military euphemism describing your view of the company stock (dead).
Back then I took it (probably mistakenly) as a backhanded compliment that you morphed from fibercon to "newfiber" shortly after Yahoo forced me to change to "new"MK. And I figured cleo was making fun of me by becoming "cleonew" about the same time.
Much to my surprise, cleo did contact me by email well after PZN's stock demise, and we had a few cordial exchanges. Not totally to my surprise, she turned out to be he. I learned a little about him, but not enough to ever figure out what brought him to being wronged by Doc.
Finally, I really am not Doc, Jr. Honest.
Enjoyed the mini-reunion....be well and prosperous! Flip, where are you?
I voted for Doc before I voted against him. He cost me a lot of money, but not all of what he made for me (timing is everything).
Actually he wasn't a crook, just a liar. Not even a habitual liar, just guilty of a poorly timed deceit. Over a longer period of time, hubris clouded his business judgment.
As charter members of the Happy Brigade, toptalk and I apologize for any mistreatment you may have endured on this mb. Always nice to hear from an old-timer, no matter how scarred.
Mid-May 1999 was indeed the beginning of the end. I am amazed, princess, that you remember the OPCO (private CCA) start up issue - I didn't at first. I have also been amazed at your wise and perceptive postings to this thread over the last few years. But you weren't posting back then - unless it was a different name. I'm curious - is that the case? Might you also have been on the private message board?
I dug into the archives, in case anyone might be interested. PZN had cut a deal with Hong Kong Shanghai Bank to issue stock to meet all its capital needs. When the stock hit the low 20s, Doc refused to take the dilution hit and instead opted to try to issue $400MM of high yield debt. On 5/14/99, just before he was to start a two-week road show in connection with the debt offering, he canceled a meeting with major shareholdeers and held an emrgency conference call to discuss an "insignificant" accounting mistake related to the the PZN payments to OPCO for start up costs.
The General posted the CC number so we could listen to the taped replay, and it was awful. Careful analysis of his comments revealed that he was, if not lying, then extrememly deceitful. What he labeled as an "accounting mistake" was really a revelation that OPCO was insolvent and that the company faced significant occupancy problems. Wall Street went nuts. Paine Weber (Jonathan Litt)lowered its rating and set a price target of 10 (100 in the post 1/10 split world we now live in).
On May 20, a poster named "v_find", whose firm had a large position in PZN, wrote the following on the private mb: "So fellas, the key thing to be focusing on right now is the high yield, because if it doesn't get done, sayonara to the stock!!" On the same day, "flipper" posted, "Paine Weber is trying to torpedo the debt deal."
As I recall, only about half the debt deal got done, and only because Lehman Brothers was trying to save face. In the course of those two weeks, Doc managed to alienate almost all of his supporters, including analysts and shareholders. He lost all credibility. The stock hit 5 or 6 by the end of the year, and later went to either .34 or .18 (I lost track after it went under a dollar.
The REIT suspended dividends, Doc resigned, and the REIT and OPCO were recombined. And here we are, trying to pay of a billion dollars of debt.
go all the way back to the Law of Large Numbers? For some reason I thought you were more recently involved with the stock.
Were you at that shareholders meeting (May 1998?) Wasn't that the wildebeest one?
...and then maybe a REIT to buy the satellites. I bet Flipper would even like it!
Interesting to see Logan involved. Maybe there's a spot for another bean counter.
If they could figue out a way to get the technology into a golf ball, it would be HUGE!
I've had involvement with private corrections in one way or another since the first beds were privatized in the mid-80s. One of the companies I worked with was co-founded by a guy who served time in prison for Watergate related problems (pardoned by Ford). The founder of another early company was last seen riding his bike to report to a prison and begin serving a sentence. CCA's founders included the head of the TN Republican party and the wife of the TN governor. States that use private prisons had to get enabling legislation passed - it was relatively cheap. The lobbyists may have cost more than the politicians. C'est la vie, but yes, we should all be bothered.
Just out of curiosity, why are you so down on this company? I'm sure you don't own any stock based on your posts.
Were you burned badly on the stock like many of us old-timers?
Are you just anti-privatization?
Nothing wrong with your comments, but they could be somewhat biased. For example shifting inmates around may be good strategy or it may be bad strategy. Having available beds could be a burden, as in the past, or it could be a huge opportunity. Seems like CCA is surving the availability of these beds.
Can't figure out where those rumors started. Son of Doc isn't walking tall. Too much commiserating with the nicster. Relegated to lurking.
"Ciao" from Mrs. MK.
You're too kind. Still buying real estate. Almost bought CCA on the dip, but remembered I already had some. You were right - I have become "resistant", to at least some of my foolish impulses.
As far as my mind, remember 2001 A Space Odyssey? I feel like HAL more and more. Daisy...Daisy.........
(as Doc would have said), I am a bit bullish on the stock. Company spin notwithstanding, they have a lot to be proud of. It seems the company is once again reinvesting some of it's earnings in a still growing business, and occupancy is well above the magic 90% level.
As someone said once, can you imagine running a hotel chain at 95% occupancy? Gosh, maybe we could repackage this cash cow as a REIT....
Toptalk - I guess it's a matter of spin, but what you quoted from the comapny's press release is comparing apples and oranges, even though disguised as a tax-effected comparison.
The Q1 '03 quarterly net income that was tax-effected is after preferred dividends of 5.5MM that were mostly gone in 2004. The good news is that the non-deductible dividends are gone (unless you held the pfd), the bad news is that it accounts for most of the increase in common stock EPS from 03 to 04.
Perhaps a better comparison of the two quarters is "Income from continuing operations before income taxes" - $24.7MM in 04, and $24.4MM in 03. They are virtually the same, even though 04 revenues are up 11.4%. That's because operating expenses are up by the same dollar amount as the revenue increase, despite some cost reductions mentioned in the press release. That's also why EBITDA was virtually unchanged, though not explained that way.
So...new revenue without additional operating income, plus there is still a billion dollar debt nut to crack. I think that's what sellers are looking at.
Doc, Jr., et al could have written this press release.
Annie, it's been several years since we've seen the hotel comparison on this message board. Reminds me of the good old days. It's great to see some enthusiasm again. This company has done a skillful job of recovering from a time when it had several new prisons with ZERO percent occupancy. NE Ohio may be the latest to come back online. They weren't empty because of lack of demand, but because of a clash between politics and hubris. Hubris lost. (Then again, so did Grey Davis - good riddance).
Jaykay, I'm with you. I've owned this stock in varying amounts and forms since 1995. While I'm not certain without checking, I don't think it ever really lost money on operations, even during the worst times (when overall occupancy was less than 90%). The financial statement losses that were reported for a while were for the most part the reversal of goofy accounting gimmicks and intercompany transactions. That's all behind us now, but after all the dilution and distributions related to those bad days, the oldtimers will never see the stock anywhere close to where it was before. But for newcomers, it's again a pretty solid story. Those who bought the stock three years ago have had bigger gains than I did from '95 to '98.
FWIW, jaykay, to this day I don't harbor too much ill will for the old management. They took a big swing, hit a long drive, but it hit the foul pole and bounced the wrong way.
Thanks General, and Guido, for the "grassroots leadership" site. That particular organization is clearly on an anti-private prison campaign, and showed up in a report by "prison activist", another anti-privatization org.
What tickled my conpiracy fancy though is that a brief web search of "grassroots leadership" found a lot of sites with organizational wording similar to the one you referenced. This may, of course, simply be due to the generic nature of the term.
Nonetheless, I traveled to Cleveland, Marin County, Canada and Siam. There were numerous mentions of grants from the Kellogg Foundation and the Mary Reynolds Babcock Foundation. Several mentions of Catholic organizations and even United Way. Much in the way of student organizations, women's organizations, unions, African-American causes, etc.
The common thread that seemed to exist was the organization of neighborhood groups and leaders to combat social evils.
As I said, probably not too unusual given the term itself. But there is certainly a lot of well-organized, well-funded stuff out there. While the press is fostering the idea that "neo-cons" are the bad guys, perhaps we should start worrying that there is a "neo-com" movement.