If the merger between LINN Energy, LinnCo, and Berry Petroleum does fall through it will take LINN and LinnCo some time to recover. While it would not be the end of the world for LINN, failure here would cause investors to lose faith in both the company and its management team. That being said, LINN had a solid future before it ever set eyes on Berry Petroleum, and it would still have a future without Berry. It would simply take investors a long time to adjust to a new reality.
That's why investors should try to focus on two key numbers when LINN reports: its daily oil and gas production and how much cash its producing in reference to how much it pays out in its distribution. These are the two metrics that are key to its long-term performance.
IMO the big news is the SEC and the little news is the merger. Failed merger but positive SEC outcome is fine. People keep focusing on the merger itself but actually it was the accounting / SEC issues that really brought line stock down.
While I agree with most of your post, I have a problem believing that it would take investors a long time to adjust to a new reality. Any investor in LINE or LNCO with more than a passing interest should be aware of the reasons for the decline in the stock price, ie the bear attack and subsequent SEC Informal Inquiry due to both the nature of the merger and accounting questions raised in the bear attack. It seems obvious that the accounting issues have been now put to bed. Whether the SEC still has issues with the nature of the merger remains to be seen. However, LINE has a proven record of successful acquisitions, including their most recent right in the middle of all this turmoil. Does all that just get forgotten due to this merger not coming to fruition? Does it seem reasonable to believe that management has not continued to pursue other opportunities, especially considering the increasing doubt placed on the BRY deal? One of my main reasons for investing in LINE was the overall competency of management and I have no reason to doubt that now. I'd like to believe that this opinion is shared by many and I consider LINE/LNCO to be an exceptional investment opportunity at these prices.
This sums up my thoughts as well. I highly doubt that there will be a massive whoosh to the down side once again like we had three months back. At that time there was liquidation from some heavy institutional holders in addition to opportunistic short sellers forcing retail investors to throw in the towel, all contributing to capitulation. Share holder base since is different.
Many present holders who bought below present price point will not be easily spooked. Yes...we still have traders to contend with who are going to continue gaming the volatility. I would be patiently waiting to take advantage of any irrational move to the downside. To be successful in this business, one cannot keep looking at evaporation of paper profits or even short term red mark in portfolio. Biggest gains are made over the long haul just by letting the events play out.