On April 28th I posted a story about a book I am writing. Click here to read it.

I may be too late.

The book titled, “Hiding in Plain Sight: How PRA Group, Incorporated Created a Phantom Fortune from Worthless Debt” discusses PRA Group, Inc., a publicly traded company with symbol PRAA. Portfolio Recovery Associates, LLC is a wholly owned subsidiary of PRA Group, Inc.

It looks like my forecast was prophetic and my book might need to be retrospective, rather than forward looking.

On May 8, 2023, PRAA was selling for $34.34 per share, according to the month-long graph on Google Finance. On May 10th, the price had fallen to $19.38 per share. That is 56% of the price it sold for just two days prior.

I am a self-taught analyst and my portfolio fell less than that during the COVID-Crash of March 2020. (I am self-taught law, also, so nothing in my blog should be taken as legal or financial advice.)

Another indicator of a sinking stock ship can be found on the SEC site called EDGAR. Here, PRA Group filed a form 8-K on May 15, 2023.

PRA Group reported, in part, “outstanding senior notes of PRA Group, Inc. (the ‘Company,’ ‘we,’ ‘our’) are currently trading at significant discounts to their respective principal amounts.”

What does that mean? I asked my new best friend, Open AI at ChatGBT.

“When the outstanding senior notes of a publicly traded company are trading at significant discounts to their respective principal amounts, it means that the market perceives a higher level of risk associated with those notes. Let’s break down the concept to understand it better:

1. Senior Notes: Senior notes are a type of debt issued by a company to raise capital. They are typically considered a relatively secure form of investment because they have a higher priority claim on the company’s assets in the event of bankruptcy or liquidation. This means that if the company faces financial difficulties, the holders of senior notes have a better chance of recovering their investment compared to other types of debt holders.
2. Principal Amount: The principal amount refers to the original face value or nominal value of the senior notes. It represents the amount borrowed by the company and is the amount the company is obligated to repay to the noteholders at maturity.
3. Trading at Discounts: When senior notes trade at a discount, it means that the market price of the notes is lower than their principal amount. In other words, investors are willing to buy these notes for less than their face value.

[LMAO. Maybe the junk debt buyer should buy a portfolio containing its own notes. The irony of it all.]

Significant discounts to the principal amount can indicate several factors:

a. Higher Perceived Risk: The market discounts the price of the senior notes because investors believe there is an increased risk that the company may default on its debt obligations. Factors contributing to this perception could include deteriorating financial performance, increased leverage, negative industry trends, or other macroeconomic factors affecting the company’s prospects.

b. Liquidity Concerns: If there is a limited market for the senior notes or the market is illiquid, it can contribute to the notes trading at a discount. The lack of buyers or sellers can lead to lower demand and reduced pricing.

c. Market Sentiment: Overall market sentiment can influence the trading price of senior notes. If there is a general pessimism or uncertainty in the market, investors may demand higher yields or sell their existing holdings, leading to lower prices and discounts.

It’s important to note that the price of debt securities, including senior notes, can fluctuate based on various factors, including changes in interest rates, creditworthiness of the issuer, market conditions, and investor sentiment. The trading price at any given time reflects the market’s assessment of the risk and return associated with those notes.”

I’m assuming companies are not happy to share the devaluation of their senior notes, and make these filings out of an obligation.

PRA insiders purchased millions in stock this week, according to a story on Google Finance. Often that indicates optimism by company executives.

Call me a cynic, but the amount the stocks cost the insiders is a small percentage of the amount some company executives receive in pay and bonuses in recent years. I’m just wondering here, but wouldn’t it benefit the insiders to purchase stock to form a sort of floor for the falling price?

I am torn. There is poetic justice if PRA hits bottom. But personally, the punitive damages I anticipate a jury will award to me on my lawsuit against Portfolio Recovery Associates, LLC fall drastically if the company continues to lose money… even if the brass still collects a pirate’s trove of compensation as the ship is swarmed by bottom feeding sharks.

Email: bohemian_books@yahoo.com