over 100 mil. shares of CQP sold at $15, makes this worth $9-10. good trading stock, but not worth holding at these prices ... yet. let the big boys hold up their own shares.
The real question is how much of LNGs ownership interest in CQP been diluted
Its impossible to keep up with all the dilution that has taken place in both entities...
LNG has been diluted by about 110 million shares in the past year
I think that shares of CPQ have been issued about 3Xs in that period
LNG holders have been diluted by more than 50% right here... If they have been diluted by as much at CQP that would mean that an LNG shareholder has an interest of less than 25% of CQP that they had 1 year ago
Our resident know it all was quick to tell us last year how LNG owned almost 100% of CQP
I'd love to see what the real #s are after this last round of dilution
By my calculations, there will be 375 million CQP units after the first two liquefaction trains go into operation. The breakdown is:
• 7 million GP units (Cheniere)
• 31 million common units (12 million owned by Cheniere)
• 151 million Class B units (Blackstone)
• 50 million Class B units (Cheniere)
• 135 million Subordinated units (Cheniere)
That means Cheniere will own roughly 55% of CQP if all goes according to plan and there is no more dilution of CQP units. Prior to all of these changes, Cheniere owned 89% of CQP.
From 1Q 2011 to 1Q 2012, the number of LNG shares has essentially doubled, from 66.95 million shares to 131.1 million shares.
So, in 1Q 2011 a million shares of LNG owned 1.3% of CQP. Based on the above, a million shares of LNG will own 0.4% of CQP, a 68% dilution. So, yes, a LNG shareholder’s ownership in CQP has been substantially diluted.
The flip side of the argument would be that the perceived value of CQP (and therefore LNG) has gone up substantially due to the project that has been enabled by the selling of LNG shares and CQP units, so the LNG shareholder is no worse off, and maybe even better off, then one year ago. A year ago, Cheniere was on the verge of running out of money. Today, that seems very unlikely.
I understand that fully and there are bigger boys who trade everyday that want a price closer to that too or shorts who make money by taking the big boys down further.
In a market where most the players are big institutions, they have to take the big players money too.
And you must know, it will take two years before LNG will be exporting. That is a long time, in a bad market, to stay at these price levels. The market has shot up since 2008. Europe is shaky and if Nat. Gas prices go up, that takes a cut into LNG's wholesale margins.
I am just saying, I think this stock will go to $10 and it is justified.
A few of you said the same thing when I said this was going to $15. I do not want to bash you or the stock. I just made a simple calculation that makes sense to me.
Because the big boys made a deal doesn't mean I have to susidize their investment.
I still hold my analysis. Many times the market is moved by speculation and hype. The placements show what the big boys see as a value price. In a questionable market now, that price is the only price to even consider investing. Like I said, it can be a good trade, but there is too much time here before any profitability.
There are some additional reasons why the $15 private placement price does not equate to the $23 market price.
Cheniere and Blackstone will be paying money in 2012 for their CQP units. They don’t begin to get any distributions (other than PIKs) until the first two trains are operational, so 2016 or later. Meanwhile, an investor in CQP common units begins to receive distributions in the same quarter of 2012. That results in roughly 16 quarters of extra distributions for CQP common holders.
Also, the CQP common units are superior to the Class B units purchased by Cheniere and Blackstone until such time as they convert into common units. This means that the Class B units have construction delay risk and construction completion risk. The common units do not have this risk (although CQP will be in big trouble in the unlikely event that the liquefaction project is not successful).