It usually stays around $1.00 difference. Just wondering if anybody else has noticed this and I am wondering the why of it? Any thoughts appreciated.
I agree there isn't much "rhyme or reason", but the spread does seem to narrow on declines increase on rallies. For LNCO to be % of LINE makes no sense to me, nor does the slightly higher yield making LNCO hold that much better in declines. In other words I dunno.
LINE's holders have typically held their stock longer than LNCO holders. They would be hurt more by selling because the basis in their shares has been lowered by the years of distributions and they would suddenly have a huge tax bill (capital gains). LNCO holders have typically held the stock since the BRY merger, and can trade their shares without that tax burden. Also, from the perspective of LNCO holders (who got the stock in the 20s), they are currently experiencing personal all time highs in the stock, and there may be some temptation to sell and take $$ off the table. Bottom line is that LINE's legacy holders are not selling because of the tax burden and LNCO's recent holders are tempted to sell at what they see as their personal all time highs in the security. This means there are more LNCO sellers than LINE sellers, and that tends to lower the price of LNCO relative to LINE because of the basic law of supply and demand (i.e., LNCO's "supply" is higher because of the sellers). Personally, I am not locked into a long term tax relationship with LINE, and so I own LNCO for its higher yield and simpler tax reporting.
I do not understand it and that's why I added LNCO to my holdings when it dropped to $26 a while back. It seems to me they should be trading in a much closer proximity to each other and that LNCO is the better buy at the moment. The only reasons LNCO would trade less than LINE would seem to me to be 1) tax implications, 2) BRY sellers and 3) general composition of holders. My impression, perhaps wrong, is that LNCO is held by more professionals while LINE is held by more retail holders. The pros may be slower to get back into a stock with a sordid recent history.
Using LNCO as an acquisition vehicle doesn't matter, LNCO stockholders aren't diluted any more than LINE, but the average Joe may not understand that. The tax difference logically will not be expressed as a percentage of price, but as an absolute dollar amount, the dividend times the present value of future tax costs, less the future benefit of tax savings at sale. Being as that computation depends on assumptions like how long one holds, it's not a certain number. The market will decide how to value it.
This is about as a consistant and gradual drop as I have seen when you look at a chart and start with July 1st(1 week ago). We need a straight up spring to overcome such fall. We are approaching almost a $1 drop in share value since a week ago today. Need 4 monthly dividends to make up such a reduction in stock value. We all know what happened about 1 year ago beginning in July admittedly for a different reason, but I hope history is not about to pull a repeat.