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Linn Co, LLC Message Board

  • altitudebrew altitudebrew Aug 30, 2013 10:44 AM Flag

    LINE / LNCO spead

    Anyone else think the $3 spread between LINE and LNCO is getting excessive? At some point why not just deal with the tax headache and take the higher return. Also it reduces potential losses in case this ends badly.

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    • Would some one please explain the tax hassle of ownning Line in an IRA.....
      I've received less than $1000 per year in distributions each year from LINE and others.
      Any explaination would be welcomed

    • I think I have the answer for the otherwise unexplainable spread. LINE is heavily owned by retail investors who are spooked by everything going on and are selling and not buying until things settle down. LNCO, by comparison, is heavily owned by institutions who probably are better informed as to what is really going on and seem to have supported the stock price of LNCO. If I'm right, this should be very bullish for LINE since the most informed investors continue to support the company using their stock of choice. GLTA

    • I believe the spread this morning is $3.76. Seems excessive to me as well. There must be other factors at work here such as short positions and availability of stock to short. Just a guess. GLTA

      Sentiment: Buy

      • 1 Reply to legalbark
      • The fact that you can't short LNCO (I tried), is causing a dislocation in the LINE and LNCO stock prices and option market. If you look at the November at-the-money options for LINE and LNCO you can see that LINE puts and calls trade at a differential about equal to the distribution over that time (normal), but LNCO puts trade at a premium to the calls. If you could short LNCO, one could short the stock, sell the put, buy the call, pay the distribution and still end up with free money with no downside risk. This is a hugh flag that LNCO is overpriced compared to LINE. It only trades at this premium over LINE because it can't be shorted. Otherwise the arbitrators would make the trade I just listed and bring the price down to eliminate the option premium dislocation. Anyone think I'm missing something?

    • There are plenty of people who have the vast majority of their investable money in retirement accounts. I know there are those who argue it is not too negative to hold MLP inside an IRA, but I think to many it is just not worth the potential tax hassle down the road.

      There are also plenty of people who have lots of money in both tax and retirement accounts but who still choose not to own MLP because of the tax hassle. You have a point for those people, a $3.50 spread makes owning LINE over LNCO a no brainer to me.

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