The SPO priced at $36.00, very nicely priced. Last quarter it hit a high of $39.20 on 10/28/11.
What makes this compelling is the following:
1) the SPO was done after a full day of trading with the deal not priced, having been announced the night before. I couldn't believe it, but we have an entires day of trading and it closed at $36.00.
2) I think if it is priced at $36.00, there will be some discounting, but it seems to be priced in. If there is discounting it should move quickly.
3) The last time they had a similiarly priced SPO was on 12/10/10. The shares were priced at $35.92. The night of the announcement, the shares closed at $37.38, but personally, I think today's pricing sort of reflecting the opening price of an SPO. It seems to bottomed out at $36.00, but okay let's say there is some discounting from here. $35.80 maybe?
4) The last SPO when this pricing was seen on 12/10/11 opened at $35.55 reached a low of $35.50 and closed at $36.60, some 57 days outside of ex-distribuition.
5) in this case the ex-distribution is only three weeks away, and the distribution is already disclosed just not announced. Most MLPs have distriubiton plans, Lines is $2.76 per this fiscal year or $.69 per quarter. So, that is known or disclosed and seems to be very safe bet. It will announce on 1/27/11 or so with an ex-div on 2/3/11 or so.
6) The stock has been held back because of former drip feed program. They realised 2.3m shares under the plan or $83m after two quarters. I feel it was holding the price back. It should not be an issue now (although it could be, but I am pretty sure the underwriters will not allow that to be occuring while they are holding risk).
7) I think it is a good set-up for a run from $35.80 or so to about $38.00, 6.1%, not bad.
8) It is the last mid-cap MLP to underperform with a healthy dividend yield (7.7%). This is stimpulative for the units, and it should do well tomorrow.
9) Last two SPos were absorobed on day one with varying degrees of success. The 12/10/10 was a very good run from $35.50 to $40.00, if you bought the low and sold the high. I don't expect that to happen, but there is some upside. While I am saying $38.00, why not $38.50?
10) don't forget options expiration next Friday.
I will not get into another discussion over which options, as we are all clever enough to chose our weapon of choice. For me, I like the big gun, July 29's, which I am estimating will fetch $7.30 tomorrow (at $36.00) and sell for $8.90 (at $38.00). I know that is not enough percentage return for you guys, but I am planning on 60 calls. 60 x 100 x $1.60 is absolute dollars of $9,600. Okay, maybe a paltry 22%, compared to Doc's 200%, but I am sure Doc will have a spread for this. I am listening Doc, the order will not take place until tomorrow.
IMO, you will be in good shape with a 36.54 BE in LINE. Per my earlier post, the history would suggest that LINE can get back up to a range between 37 and 38.50, with a bias to the high side. Good luck.
Thanks, yes some of the posters on the LINE Board appear to be purposefully disruptive. But, that is the state of many Yahoo Boards. My two favorite boards are the AGNC and MWE as both have posters dedicated to expanding investor knowledge.
Concerning my purchasing of the Feb calls and not longer in order to avoid the possibility of a short-term market melt-down, my trades today were to reduce my average cost after kind of messing up yesterday. Got my weighted break-even down to 36.54 from 37.21. It may turn out to have been a mistake. I loved Doc using the word temerity (foolhardy disregard for danger) to describe our trades, though I think he mostly meant me.
In any case if I lose on this trade there is always another.
Thanks again for all you do to help make this Board a wonderful place to visit.
They really need help on the Line board; infiltrated by pesky and nasty posters. Hard to get good information over there and they don't trade. Anyway, Divy, glad you are here, and you have one nice position rolling. We have 4m shares to go before the overallment. I bought the longer dated calls, just in case I have to hold through, which I will do. I have seen line and the other MLPs run after the dividend run as well. Just not quite sure about this short dividend cycle. I wonder if they won't move the ex-distribvution date out a bit to say 2/5. That would be a good idea. Otherwise, as long as I get to $37.50, I will do very well. Even at $37.00, I do okay. I just want to breakeven since I have the heavier exposure on the calls purchased before the offering. HOwever, I can see the possibility to a move up. Oops Franc e just downgraded. Anyway, good luck!
I had my finger on more EPD Feb. 46's in the late morning when it was down .25 but had to be away from the computer for a while and was afraid it would continue downward. The good/bad news was it was up .20 when I got back lol. Hope we all do well on EPD.
I feel ya with the leverage. I prefer structuring risk with options too but I saw it down at 35.78 while the options starting gate was still closed. I like to set rediculous limits and hope to get some lucky fills. Has happened many times.
Im like you and dont like LINE much so I stayed small and cheap just bought some feb 36 calls for .65 looking to sell the 37 when they get up and go a bit.
Well I waited until I saw some upward movement before I jumped in. Bought 30 Apr$34 calls for $2.65. I probably could have gotten them for $2.55 at the opening, but I wanted to have some confidence the PPS would start going up. Looks like they have completed 15M shares of the 17M of the offering at this point (1:00 eastern time). Maybe I can recoup some of my AGNC Jan$28 Puts which I sold for a loss. I'm also hoping I won't loose anything on my EPD Feb$45 calls.
This certainly has the makings of a very interesting year.
GL2UA and go AGNC, EPD, & LINE.