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Breitburn Energy Partners LP Message Board

  • bigbear.2010 bigbear.2010 Jul 24, 2014 10:34 AM Flag

    A question?

    Hey Folks. Why is BBEP selling off when it will be a much stronger stock after the buyout. This is the first buyout stock I have owned so I am a bit uneducated with the process,. Any comments would be welcome and my thanks in advance.

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    • dilution of shares and potential for a new offering to cover the cost of purchase, no free lunch, positive side if bigger is better we are getting bigger, hopefully mgmt will rise to the occasion and increase distribution as planned or LT more than planned. I had a tight trailing stop on but decided to pull and stay long for now see what happens. with the low interest everwhere else MLPs the only act in town. our biggest risk is the govt doing away with the concept. Look what happened in canada in 2007 in CANROYS. And curiously is was a lying conservative who did it, considering what we have here is that scary or what it just takes a presidnetal order these day ?

      • 3 Replies to irbbping
      • Will the acquisition really be dilutive to earnings? BBEP is raising the dividend to $2.08 from $2.01.
        Anyone buying QRE for an arb play?

      • Thanks irbbing for your reply, I remember a Halloween-I think it was-when Parliament took secret session at-night and abolished the tax free status of all the Canadian Trusts. At least they gave them a three year period. I forget who was in power in Canada at the time but, in USA with this regime who knows whats next.
        da bear

      • I tried posting before but it apparently didn't take... IRB - why would there be new offering to cover the cost of purchase when the acquisition is 100% shares? Yes, there'll be shares issued to QRE shareholders, but I don't think that will be "dilution." bigbear - one definite reason for the selloff is the arbitrage effect.... Arbitrageurs typically sell the acquirer and buy the acquired to take advantage of the spread between what will eventually be identical equities. I think (I could be wrong) arbitrageurs are even more likely to take this traditional stance when a deal is all shares, no cash, as this one is. For example, as I write, BBEP is at 22.31 and QRE is at 20.55, BUT, under the terms of the agreement, 1 share of QRE will be worth .9856% of a share of BBEP or 21.99. Arbitrageurs will try to lock in that spread of 32 cents by selling BBEP and buying QRE, locking in riskless profit over time assuming the deal goes thru. It's the arbitrageur's job to then have a good read on the likelihood of the deal to go through and the timing of it to figure out whether or not the yield spread is sufficient for them to jump on the trade.

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