If they try to stuff this thing at 65 it will go a lot lower. Just look at what happened with ETP today- closed another 2% below where Goldman priced it. Bof A is a joke- watch out- you will get every share you ask for!!!
Hey Sage, are you always so rude? Here are my reasons based on 17 years of investing in MLPs.
Secondary offerings are something that happens regularly for MLPs. The price almost always recovers within a couple weeks or less.
Do you want PAA to continue to increase their distribution? How do you think they can do that without raising capital? What do you think would happen if they offered several million units at the market price? Could they sell their offering in one day? What WS firm would handle it for nothing? Got to give a bit of a discount for a broker to step up and buy a huge lot otherwose no reason for taking the risk.
Could PAA have picked a better time, sure, but they have no idea whether tomorrow will be an up day or a down day on the market. In this market, it is not uncommon for the market to move 2-3%.
PAA had a need to raise equity capital and they did. No use crying over spilled milk. PAA's management team is one of the best in the sector. I would imagine PAA holders would be screaming if PAA had chosen to sell equity at near the bottom rather than near their 52 week high.
As arb said, this will be a blip in a few weeks.
Every MLP is getting set up with their equity offerings as there is normally some selling in December by those who did not like dealing with K-1s at tax time.
Refinancing of debt is also a priority for many along with, as already said, getting lots of free cash. MWE for example just refied at 200bps savings and now have enough cash and credit ($1.6B!!!!) to handle expansion plans for the next two years.
A drop of a couple point for a secondary is a true yawn for investors. A buying blip, but almost anyways nothing else unless you are a trader.
I have bids in at $64.00 and dollar increments down to $59.00. Everyone in the field is getting ready therefore these offerings. We should see some consolidation too. The deal with SWN and BWP has me looking at more BWP too and I have a bid at $25.00 for that. Even though I have held since IPO and added more I feel like it's the last time to really add to LP sector before we are go higher in 12. Any thoughts??
Again, growth takes capital.
All of the MLPs should be going to the market. Yields are low, the market is "relatively" stable right now and any company that has expansion projects in 2012 and 2013 should be lining up to tap the equity markets for at least 50% of the total expansion cost. You have to strike while the iron is hot.
Companies like PAA with a strong coverage ratio can afford to raise equity a little sooner than necessary, even if it won't be fully deployed for 3-6 months.
Personally as a longterm unit holder, I am happy to see unit offerings because it means the company has secured the capital it needs to expand.