SO funds will be used to pay off revolving line of credit debt incurred on LINE's last acquisition. Effect on cash flow is negligible, effect on balance sheet is positive, and the dividend is secure. This is how MLP's work. Because they pay out so much of their profits in dividends, they need to either incur debt or use SO to raise cash to expand and grow the business. I still think LINE is a good long term investment and those people selling shares right now will regret it in 6 months.
Here's my question (and perhaps someone more knowledgeable can answer it). Linn's credit line costs less than 4% in interest, right? (LIBOR + 1.75%-2.75% is I think what the last 10q said). They issued bonds in May at just over 6.5%. Now they're issuing stock at a yield of 7.7%.
So aren't they raising the cost of their capital? I understand you want to match duration to needs, but it seems like this has to cut into cashflow unless the dividend shrinks, which would reduce the yield and thus explain the benefit of stock issuance.
No you do not understand at all. It is not a forced or free consensus of opinions but the meeting place of all those opinions as expressed as a trade price in a double auction system. That is the only agreement in value at that point in time between a seller and a buyer. It does not involve a market group think.
If you look at the long lines of bids and asks; like Ben does, you would understand. So you should take a moment and do so.
Bubbles do occur and usually due to some Progressive economic distortion. Like 'alternative energy', 'Internet future here now Clinton NAZ5000', corn based ethanol and subprime loans.
Then there are ones like the Nifty 50 which over the sweep of time actually did work out ok. Trains and a few others.
I think part of the reason LINE is down is due to falling natural gas prices, but those people apparently did not read LINE's end of the year report, which stated (verbatim) as follows:
"Commodity Hedge Update
The company strengthened its commodity hedge positions and fully hedged production volumes associated with its Granite Wash acquisition. Based on current production estimates, expected natural gas production is 100 percent hedged at prices above $5.45 per Mcf through 2015."
LINE is completely hedged at nearly double the going rate for natural gas for the next 4 years. Thus, falling will have no effect on earnings.
I think this is one thing investors have overlooked in selling the stock. As such, I'm looking to add to my position once the selling abates. Indeed, I agree that the issuance of units to retire more expensive debt is a good thing--something a prudent business manager would do.
"I can indeed explain the market."
no one ever really knows...it is always a best guess.
You may think you can explain it but what you describe in the "wisdom of the crowd" or the distillation of all the information to an eventual price is merely what the chart will then show.
And, if that is what you go by then you would be buying around here:
"what I call a dog & pony show"
If you do not like the way they presented their slides and call it a dog and pony show, you still have not said what information or data you think is incorrect.
I appreciate your optimism, but there is zero chance Linn turns this around in 6 months. Try 18 months.
If Linn was going to looking better by June 2012, the market would have recognized it, and priced it, back in Sep/Oct.
What you are seeing today is the validation of why Linn flat-lined for 2011. The people that knew Linn spread the word, and the word wad that Linn - an admirable company run by nice guys - was and is dead money.
The "game changer" slides, etc. was pure dog & pony.
msnapp, since you seem to not believe them on:
"The "game changer" slides, etc. was pure dog & pony. "
How about that 60 million cu ft/day or those averaging 19 million, gas wells in the Granite wash?
Was that pure dog & pony also?
They presented data on the slides, how can you be so dismissive of it?
What data or reasons do you have to think that theirs is not correct?