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Linn Co, LLC Message Board

  • lexpress56 lexpress56 Apr 12, 2013 3:02 PM Flag

    What happens to the spread if and when LNCO issues more shares?

    When LNCO was formed it issued 34,787,500 shares and purchased an equivalent number of LINE units. What happens when LINE wants to access capital the next time via issuance of LNCO shares? Does the spread suddenly disappear in order to return to the 1:1 ratio of units to shares? TIA for responsive input. Lex

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    • What do you mean by "the spread suddenly disappear in order to return to the 1:1 ratio.." The ratio is already 1:1; the price isn't, but the ratio is.

      When LNCO issues the 50 million new shares to buy Berry, the price will likely drop a few dollars. But so will LINE.

      • 1 Reply to rlp2451
      • RLP

        The words you quote are part of a question, not a statement. I looked at the LNCO annual statement and, from my reading of it, understand that LNCO's original purchase was at par. I forget the precise numbers, but LNCO was issued at something line $36.50 a share that generated, say, $34.58 after underwriting expenses etc and that was the price paid to Linn for units.

        Going forward, I am asking if the spread is impacted by the process. Maybe a better way of asking is to simply inquire of your understanding. Let's say LINE needs $2B to close the Berry deal and want to access the capital markets through LNCO. Round off todays prices at 41.40 and 38.40. How will the LNCO shares be priced to net the dollars needed for LINE given the discrepancies in current market value? How might it be different if LNCO was selling at a discount to Line based on lower yield? Maybe it is a stupid question, but I dont understand so TIA for helping to educate me. Lex

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