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EV Energy Partners LP Message Board

  • artist_formerly_known_as_pooch artist_formerly_known_as_pooch Feb 9, 2010 9:29 AM Flag

    The Upside

    We've had a pullback on an MLP and broad market selloff.

    We now have a successfully priced offering and accretive aquisition.

    Going forward we've eliminated a lot of uncertainty and overhang of POSSIBLE dilution.

    Now you have a well run, well hedged MLP with a fairly safe 10.8% distribution.

    Going forward, that's a very attractive yield. You'll see price gain simply based on yield compression, if nothing else.

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    • Not clear to me why EVEP would screw over present holders with the low pricing that is well below market. Why wasn't the offering at market?

      • 3 Replies to bobbobwhite
      • They had a 3 million share offering in Oct, which was priced around $24 and the over-allotment was placed. The most recent is for $28 - a 16% increase in 4 months- pretty good in my opinion.
        That is if there is not prob selling at $28.08 - I'm buying abit if I can get it for $28.08.
        It cost EVEP about $2 million to sell the shares a 2.5% commission.

      • bob, go back and look at almost every MLP that did an offering recently (I bought a few, including ETP, ENP, EPD, NGLS and MMLP after they announced offerings). The way the market for MLP offerings works is that the price always falls when the offering is announced (in the aftermarket) because there is dilution. On the night before the offering, the underwriters have to get those shares offered in the offering priced, so they have to drop the price (even more than the initial selloff on the announcement). Some even say that the hedge funds have shorted the shares on the announcement of the offering and use the offering to buy back those shares at the lower price, thereby producing a profit. Anyway, I've watched this offering process occur with several MLPs. My advice is either decide whether the MLP has the right plan and get on board or don't, but don't complain about the offering process as it is very common.

      • "Not clear to me why EVEP would screw over present holders with the low pricing that is well below market. Why wasn't the offering at market?""

        Who would buy a block of 3 million shares "at the market" ????


        Assume you had 3 million shares in your trading account right now and wanted to sell them. What would happen to the "market" price???

        also, remember, those 3 million shares are "diluting" your ownership stake by approx 10%. EVEP made an accretive aquisition so the market is only "penalizing" EVEP by 5% since the company and hopefully the DCF will be larger.

        But the bottom line, EVEP is no different than anyone else with 3 million shares to sell. Short term it will impact the unit price. Long term, the growth story is intact.

        By the time the next distribution is announced, this offering will be a non story

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