I am a LT shareholder and am completely fed up with this holding...offering after offering after offering...no distribution raise in an era when the pipes are bursting at the seams with nat gas, NGL's and refined products. Energy Transfer can't manage to catch a dollar or two in a thunderstorm where Franklin's are falling from the sky and most of the other pipeline operators are drowning in revenue. Management runs this MLP as if it's the same business model as AMZN...if the offerings are paying down debt and are going to boost efficiencies and congruences 30 quarters from now, great; I'll buy more shares in 7 years.
I'm convinced that management will not be boosting the distribution EVER, and I will reference this post each and every quarter they fail to deliver. I sincerely hope that I'm proved wrong in this regard.
I used to think that the chief officer of this operation was a genius math dork with bad people skills in the conference calls and press interviews, but I'm currently more inclined to believe that he's a bumbling idiot who couldn't make three cents on a dollar investment when banks were offering simple savings accounts with interest rates above 10% APY.
...and yes, the DRIP discount looks and feels like a great deal. It's not.
There is an old saying on Wall Street. Always follow the money. And the money is flowing from ETP to ETE the Mother Ship. in the form of IDR's The payment accruals are so large that ETE has agreed to defer some payment for a number of years. ETE's unit price has been ramping up recently because distributions on ETE are expecced to ramp up over 20% a years for the next few years. The bulk of the money will be coming from ETP. So much money will be flowing to ETE that ETP will be eventually forced to buy out and/or merge with ETE. The money will flow to ETE in the merger/buyout with a large premium being paid to ETE holders for selling the IDR's (Incentive Distribution Rights) This will take time to do and will happen after after ETE-ETP completes their current simplification reorganization that is currently ongoing. This will greatly reduce the cost of capital to ETP and allow them to be more competitive (Without paying the 50% IDR's going forward)
ETE is the buy now and will create tremendous value going forward into the eventual merger. The ETE units will be traded for ETP units and ETP will prosper going forward.
I look for my favorite MLP to do a security offering as a time to buy shares. The shorts and hedge funds know they can buy shares of the offering at a discount to cover their 3% - 5% profit in short time frame. It is almost as if these securities should be priced right away instead of forced by SEC to wait. The pricing of stock immediately after offering announcement falls hard, it is as if they believe the entire amount of money raised will be flushed down the drain. We see that is seldom the case. SEC should put limits on selling by hedge funds (short especially) during time a share offering is in the works. It is stealing from the rest of us.
Whether it is MLPs or REITs, we see the same pattern over and over again. Mark West Energy did the same thing about 6 months or so ago. The stock initially dropped in the AH, then recovered to the point where it has now reached new highs. Events like these simply require patience.
Timing-wise, it was probably a smart move with the ex-dividend date less than 30 days away. ETP should rebound relatively quickly heading into early May.