Management allowed the investment banks that sold their IPO in LYNCO to bring it to market at $36.50 a share when the units last week were selling at $42.
This 15% dilution of the current investors gave a better deal to Wall Street and the major institutions that got most of the shares. This was all at the cost to existing shareholders.
The new unit holders do not even have to wait one full quarter to earn a quarter of the dividend or distribution if you want to call it that.
As a large unit holder in Linn I am really #$%$ off at management for being asleep at the wheel in terms of protecting existing investors. I have never seen a share offering at this kind of discount. No existing investor in Linn Energy ever received that kind of discount if they purchased shares at one of Linn's offerings.
While I certainly agree that the pricing is troubling, especially after Linn announced that they expected no more than a 5% discount to Linn's closing PPS on Thurs., we don't know what Linn's options were or if they were obliged to trust (ho, ho) the investment bankers, those exemplars of fair play and sterling protectors of investors' interests. For all we know, management could be infuriated at the pricing but helpless to do anything about it. I don't know. But I can't imagine Linn willingly surrendering $45 million to fatten investment bankers' wallets.
The initial public offering price was negotiated between the representatives and us. LinnCo’s only assets, both immediately after this offering and in the future, will be LINN units, which we will own on a one-for-one basis for each of our shares outstanding, and cash reserves for future tax obligations. Given the nature of our business and assets, we expected that the initial offering price of our shares would be within 5% of the last reported sales price of LINN units on the NASDAQ Global Select Market prior to the determination of the offering price. LINN units are listed on the NASDAQ Global Select Market under the symbol “LINE.” The last reported sale price of LINN units on NASDAQ on October 11, 2012 was $40.01 per unit.