Why Corrections Corporation of America Shares Surged
Apr 5th 2012 3:07PM
Updated Apr 5th 2012 3:08PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Corrections Corporation of America (NYS: CXW) jumped 12.5% in early trading after an activist investor announced a position. Shares have settled at a 5% gain as the day went on.
So what: Corvex Management joins Marcato Capital Management as two hedge funds with significant positions in the company. The two companies are trying to convince management to convert the company to a real estate investment trust for tax purposes.
Now what: A REIT has tax advantages over a traditional corporation, and the two funds think the structure could "significantly lower cost of equity capital." The move could be good for shareholders, but a final determination has yet to be made. The bump that occurred today may not last in the short-term so I wouldn't be afraid to wait out traders who jumped into the stock today if you're looking to buy.
Interested in more info on Corrections Corporation of America? Add it to your watchlist by clicking here.
At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Motley Fool newsletter services have recommended buying shares of Corrections Corporation of America. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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