When I examinedGEO Group
Geo Group, which runs correctional, detention, and residential treatment centers, said Tuesday that it plans to sell 4.8 million shares for a predicted $209 million. The company plans to use $200 million of that to repay company debt. Though this deal dilutes existing shareholders' ownership, it might ultimately serve the greater good.
This move will lower Geo Group's debt-to-equity ratio from a rather high 1.99 to a more reasonable 0.66. There's nothing wrong with a levered business model, and the company's recent results suggest that it had no trouble meeting its debt payments. However, this move should help ensure that its debt doesn't become a bigger problem down the road.
Prison stocks have fared well so far in 2007. Geo Group is up 23% since the beginning of the year, recently reporting a monster Q4 and an increased outlook for 2007. Shareholders of Corrections Corp. of America
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