Linn is a real company. They have 19,000 wells, 800 million BOE of proved reserves (Worth about 80 billion), 1100 employees, and locations in multiple areas of the country. Their book value in around 4 billion and sales are about 1.7 billion. So what is the magnitude of the issue of how they treat the hedging puts that they have bought. Accountants have a great term that I think applies here - immaterial. Is this issue going to force the company into bankruptcy and send the CEO to jail. I seriously doubt it.
Now will the stock go lower? How long will it take to correct to a more logical value? I have no idea. But at the closing price on 7/3, it is yielding 12.7%. I can borrow money in my margin account at 8% and make 4.7% on someone else's money. I like that. If it goes even lower, I like it even more. This will all be settled and in hindsight will look like a molehill. As Warren Buffet said "When it's raining money don't go outside with a thimble, take a wheelbarrow.
You are presuming the payout for that yield will continue indefinitely, but if they cannot close the deal with Berry Petroleum, they won't have the added revenue to continue the payouts. Also, do you realize they have $6.2 BILLION in debt that they will have to do some refinancing in the future to keep the interest payments down?
I do realize that they have that debt, but they have much more in assets. So far the Berry deal has had no effect on the distribution. They have managed to grow the distribution through organic growth and acquisition. Are there other deals out there if the Berry deal doesn't go through? I think there are.
The shorts will go after all the E&P MLPs who do the same thing. Thats the way the whole sector works. Looks like after they have killed LINE, they'll go after BBEP next. Shooting fish in a barrel since there is no protection from bs. Thats the way freedom of speech works in the financial markets.