Management was not obligated to disclose the recent notification of the (private) SEC inquiry. Certainly, the risk was present that the information about the SEC inquiry would be leaked anonymously which may have forced Management to come forward with this information now, rather than wait for a leak to surface and face another round of new rumors. However, is it possible that Management came forward with this information in order to force the SEC to make their findings public at the end of the inquiry? What better way to put an end to all the rumors than to have the SEC publish a statement that ultimately finds nothing wrong with the accounting practices used at LINE. I know a lot of investors out there think that the Management of LINE are idiots, and it would be hard to argue against that premise based on the current stock price, but Management had to know that coming forward now with the information about the (private) SEC inquiry would crush the stock price in the short term.
Since this was the Forth Worth office I expect we will hear from the SEC pretty soon, it's not like LINE is the only MLP in Houston or Texas. The Forth Worth office is familiar with LINE and MLPs in general.
6 months ago the LINE hedging strategy was the toast of the town, look how smart those guys are. When gas prices were at record lows, LINE looked pretty smart. Nothing has changed, except some knuckleheads with no skin in the game are out flapping their gums; it's so easy to be finger-pointed versus actually doing something useful.
There's very few companies that don't have non-GAAP items, just look at the 10-K's. We haven't heard from the IRS about LINE's accounting, which LINE has reported since 2003. Yes MLPs are tax advantaged, but its a tax deferral, you will pay taxes when you sell your shares if have a gain, its not some ponzi scheme. No way the U.S. could have developed its energy sources as fast as they did without the tax legislation Congress legislated.
The LINE management team isn't a bunch crooks, they have real valuable assets, beyond the Berry deal. I actually think they were trying to be prudent, sure managers make mistakes, but CEO's are paid to take prudent risks. I expect two things to happen: 1) SEC want find anything wrong with the accounting, non-GAAP exists because no one really knows what the one best way to do the accounting, if the SEC suggests
anything it want be material. and 2) this will move the Berry deal to closure, one way or the other.
I think they needed to get the air cleared before the Berry acquisition. I'm sure they also have a ream of data regarding short selling, Barrons, Hedgeye and the hedge funds that have colluded in this raid. Hopefully the next stop is a formal inquiry into the short selling cadre and after that some jail time for RICO violations.
SEC never (almost never) investigates illegal insider trading (heavy volume) before news such as Barrons articles is known to the masses. We have a number of times in recent month or so when selling was heavy before news / articles came out. It is fishy but SEC will let the crooks off the hook. Even if shorts are right, it looks like they did their selling / profit making illegally.
Of course that is just a dream that anything happens to the short sellers that colluded to take this down and will walk away with millions. What is sad is those that sold and took big losses for fear it was another ENRON.