Because KMR is increasing its number of shares by about 10%.That dilutes for the short term the per share value, but it brings in new money and means growth in the overall company. After all, increasing the number of shares in KMR is the way the LLC is set up for tax purposes. We have a down day but long term value will be created. Also notice the simultaneous announcement of the expansion of KMP by moving 50% of El Paso Partners into KMP. All of this is the growth story. Value will come. By the way, notice how this is the way we grow the number of shares these days. It used to be by stock splits and then investors would buy up the shares because they perceived the company's value was growing.
"Because KMR is increasing its number of shares by about 10%.That dilutes for the short term the per share value, "
it has nothing to do with "dilution" -- there is no dilution, KMR is getting cash for each new share, if anything selling shares at this price is accretive to per-share value.
The drop is solely because the new shares will be issued at a slight discount to current market price -- most likely 5% or so -- so there is great incentive to sell shares in open market (or sell short) and just buy them back cheaper at the offering price.
Of course, there is no real dilution. I said it was just for the short term, and this is because of the common perception by current shareholders that the number of shares are being increased but they don't perceive the "money in the bank yet." They are just looking at all the shares being put up for sale today. And like you say, the shortsellers jump on board to make it even more of a sell off day.
I wouldn't want to get into the actual share price of KMR on offer in this new stock offering of KMR. However, the point you make reminds me of what happened to Cisco Systems in the 90's. They kept reporting astounding net profit increases and then somebody pointed out that all those CSCO stock options that they were giving to their employees were a real expense to the general shareholders. So the SEC required Cisco and all the other public companies to start subtracting the costs of those distributions of shares and stock options from their earnings(making them GAAP earnings). To this day, CSCO analysts get confused over GAAP earnings and non-GAAP earnings and it sometimes causes huge drops in the share price of CSCO. Not saying this is the same as KMR, but any perception that somebody is getting a better deal on their shares is seen as a cost to the present shareholders. But long term, again I say that all this is really just part of a nice growth story and will grow shareholder value.
I think it has something to do with the dramatic drop in the discount of KMR to KMP that has occurred over the last several months. New investors are showing a big preference for KMR over KMP but at high prices. They may have decided to take a short term loss and sit back and think about what is going on. The discount narrowing may have gotten ahead of itself.