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Linn Energy, LLC Message Board

  • norrishappy norrishappy Feb 23, 2013 4:21 PM Flag

    WSJ Hulbert Apple: Why Bad News Just Keeps On Coming

    An excellent piece explaining behavior finance aspects of analysts downgrades. On the down side they both tend to lag and then do a group jump after the share price starts down on news. There is cover in it rather than being the name remember by management and loss of information or contact access.

    The real objective was to get the unit price down, create uncertainty of debt coverage, that increase in cost of capital bringing in the equity analysts as cost of debt and access comes into question. It certainly helped the cause that their was negative watch on the debt. This is the danger of running debt at 1/3 of market capitalization. So the 'discovery' that the sunk cost of puts was not in future DCF was an excellent foil. Paired with some puts bought above strip or market price brings in uncertainty to the actual forward DCF calculation.

    Now management successfully blunted it all. But hopefully they have learned their lesion. The coverage ratio needs to be kept at 1.2. They need to be more attentive to the credit analysts. Finally as some limited amount of puts are useful to the business model they need to improve disclosure of the variance to market price.

    Well worth the read. There is a big difference between normal human nature and functional behavioral finance and game fixing. This short attack was game fixing.

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    • Norris how long have you been investing and how old are you? This is a typical short raid created by maybes towards a company. Only person that doesn't understand ths is someone who hasn't been investing very long. These guys pick out what could be a problem but really isn't and create fear amongst longs. It is part of our efficent market that you brag about so much. The only thing this did was shake out the weal links and craet a short for a week to pile into.

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