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Natural Resource Partners LP Message Board

  • franzemuller franzemuller Feb 20, 2014 12:43 PM Flag

    DID YOU SEE............

    all of the insider selling on Feb. 11, 2014. When your board is selling, nothing else needs to be said.

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    • Actually, there were no units sold at all. No option exercises, nothing.

      There are tax reasons why partnerships, including MLPs, stay away from option based compensation. Instead, what most of them have, including NRP, are phantom stock/unit plans. Under these plans, the MLP agrees to pay a cash bonus to an employee or director equal to the value of a fixed number of units on a particular day. Say you're a director. The plans says that NRP will pay you, in cash, an amount equal to the value of 1,000 NRP units on February 15, 2015, 2016 and 2017, assuming you are still employed by NRP on those dates (if you quit in the meantime, you lose the bonuses). If the units trade at $ 20 on those days, you will get a cash bonus of $ 20,000 on each of those dates. If the units go up in value to $ 40, the bonus will be $ 40,000, No units are issued; that is why they are called phantom plans. The bonus is measured by the value of the units, but no actual units are involved.

      For SEC ownership rules, the vesting of the phantom units is deemed to be a buy (even though no units were issued) and the cash payment by NRP is treated as a deemed sale (again, even though the employee didn't sell anything). All the Forms 4 tell you is that NRP paid out bonuses of several million dollars related to 2013 performance.

    • Net shares purchased by insiders is 2,121,630 on February 11, 2014. Check the insider post again and look at the top summary. Cheers.

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