I would guess Barry and Kaiser are now in the waiting mode. On the substantive issues of whether LINE's distribution and ability to grow through acquisitions are in jeopardy, it would appear from the S-4 filing (and the additional acquisition announcement) that neither are in jeopardy. In fact, it would appear the ability to cover the distribution is enhanced by the new language and the newly announced acquisition. So, while Barry and Kaiser could perhaps pound their chests about being right on a few of the finer technical accounting points, on the substantive issues that shareholders care about and that will effect LINE valuation, they appear to have been dead wrong at the moment. Only time will tell as this entire saga plays out.
In my view as a former CEO of a public company having dealt with government agencies, it appears to me that the Company has accepted a lot of things that have no material effect on their business to satisfy and agency that wanted a pound of flesh. I say this knowing Raymond James said the changes would have no impact on the distribution (and they must have confirmed this with management before saying it publicly). I also say this because if the distribution were in jeopardy, they would not even bother to try to proceed with the BRY deal. IMO, when Goldman and others come out supporting the idea that these changes to language are not material and do not impact the distribution, the stock will return to where it was a couple of days ago and head towards the low $30's again.
I don't give much credence to these SA articles, but I do expect the Raymond James analyst knows what he is doing when he claims the distribution is safe with the new approach to calculating it. Someone else suggested on this board that Goldman Sachs has concluded the same thing, though I have yet to find that one. GLTA
While I was hopeful we would hear the S-4/A had been made effective, the results are quite impressive on their own. Obviously, news that they covered the distribution in the period, expect an even stronger next period, and plan to close the one outstanding acquisition by end of month are all very positive. The reference to a 6th S-4 amendment is likely just to add the results from the quarter, as they must do. GLTA
No doubt, the incremental dilution of the higher bid for the combined company is about 8%. So, if you had hoped to recognize $40 per share in the near-term, you may want to reset your sites to $36.80. But, I would argue that this management team has delivered year after year and none of us know the facts they considered in upping the bid, so we should give them the benefit of the doubt. For example, I doubt they had other meaningful acquisition alternatives. Anything significant would have required equity and no one would want to talk to them when they were subject to an SEC inquiry. With BRY under their belt and the SEC inquiry behind them (if it is), then, they are primed to pursue their strategy of making accretive acquisitions that allow them to raise their distribution, even if the BRY deal ends up taking one step back for two steps forward.
Wow. Did he really say that because it is does not represent at all what he is telling his Action Alerts subscribers. What he is telling them is that he is being disciplined in not owning a company with SEC issues, but he believes their assets are worth $40 per share (so they are cheap) and he believes the recent S-4 filing suggests the BRY deal will get done.
I would think we would wake up to updates from one or more analysts. And, since the "credible" analysts have all remained constructive even during this period of adversity, I would think they would be highly motivated to gloat a bit and be very positive supporting a continuation in the stock price. So, I would think the stock goes up to the low $30's from here, whether tomorrow or next week once people have had a chance to absorb the new information and re-run their models.
Yes, it's very good for LINE shareholders.
If the SEC clears the S-4, this should be a catalyst for LINE stock. The completion of the deal should be a catalyst both because it would be accretive and, at minimum, secure the distribution. And, if management were to stick to its original plan of increasing the distribution from $2.90 to $3.08 per unit upon completion of the deal, it would be another catalyst.
IMO, if the SEC clears the S-4, the deal will get done and these catalysts will all fall in line. It may still happen at the 1.25X since LINE stock should rise with the S-4 clearance and BRY may actually fall towards the expected deal value per unit. Also, BRY has a nearly $2 per share break-up fee they would owe if the deal failed because their shareholders didn't approve it ($84 million that they do not have without borrowing it). But, if it gets done at a ratio somewhat higher, it's doesn't change the ultimate value of the combination materially IMO.
Both may be right. The SA guys appear to be right on the non-substantive minutia of fine accounting principles and Kramer appears he will be right on the substantive issues that the distribution is safe and the BRY deal will ultimately get done. Time will tell.
We could hear in the morning that the SEC has made the S-4/A effective. This would be logical since LINE made it the Record Date for the transaction after filing the S-4/A and in doing so suggested that they are on the same page with the SEC in the filing (presumably from discussions and negotiations they have had with the agency).
Another possibility is that the SEC simply doesn't respond and allows the S-4/A to become effective on its own which will happen after 30-days if there is no SEC comment. That would be about Oct. 19th.
A third possibility is that LINE/LINCO filed the S-4/A and set the Record Date simply to meet its obligations under the Merger Agreement with BRY and not because they have negotiated acceptable language with the SEC at all. The end date for the original Merger Agreement is October 31st. However, the end date can be extended under the circumstance where all the conditions of the merger have been met, except the S-4/A has not been deemed effective by the SEC. That said, I am not an attorney and don't know if it is plausible that LINE would take this course since it would seem that filing an S-4/A and setting the Record Date for a transaction under the current circumstances would be antagonistic towards the SEC (who holds all the cards), if no good faith negotiations have occurred between the parties with an honest attempt by LINE to accommodate the SEC's demands. Yet, in this scenario, the timeframe could be entirely unpredictable.
Personally, I think we have a reasonable chance of waking up to a news release in the morning that the S-4/A has been declared effective. If not, I believe it is forthcoming because I do not believe LINE would file the S-4/A without having negotiated the language with the SEC nor set a Record Date for the transaction. GLTA
I view the lack of an announcement as encouraging. It means the parties are allowing LINE stock to recover. That could be because LINE has refused to negotiate the deal, but BRY doesn't want to walk away, so they have no choice other than to hope the stock price gap narrows to support the current offer. Or, it could be because LINE has told BRY that they are open to sweetening the deal if the stock price gap doesn't close in the next few days or couple of weeks.
BRY management is highly motivated to get this done. They checked out mentally long ago. They have emotionally moved on, but are being held hostage by the process. They won't take a really bad deal, but they will give the deal every chance to come together. Therefore, I believe the chance of the deal being called off Wednesday is near zero.
My guess is we have a 50 percent chance of hearing the deal is done at some agreed to ratio on Wednesday (higher chance if LNCO stock climbs Monday and Tuesday). And, we have a 50 percent chance of hearing that both parties remain committed to the deal and expect to provide further information in the coming days or couple of weeks (allowing LNCO stock further time to recover). I don't see it dragging on longer than a couple of weeks though. Just my guess.
The commonality we can all share on this board is our interest in LINE as an investment. It's a waste of time and energy to discuss politics, religion, etc. because those are mostly views held deeply based on what our parents and grandparents taught us to believe (in most cases) and not because of any special skill or knowledge any of have acquired over time or possess.
Professional money managers do not like SEC issues. Once these are cleared up, they will gladly buy back in at higher prices.
I agree, however, it should be announced the moment it is made effective because of the materiality of the news and they want the stock to be moving up to close the gap on the BRY price. IMO, they are waiting for the SEC to clear the S-4/A before they set the CC date, but they must report within 45 days of having completed the quarter, so they only have a couple of weeks here.
I have a sizable position in LINE and don't mind thinking a bit. No company gets in a hurry to publish their 10Q and hold no call, when it is their custom to give reasonable notice and hold a call, without a reason. So, there is a reason, it's just a matter of what it is. But, I can assure you the change in habits is not that they believe "no comment" is the way to project confidence. And, the explanation must be substantive because it's nearly unthinkable not to hold a call.
This is not a management team that elects not to have a call simply to avoid their shareholders and analysts in such uncertain times. The only explanation I can fathom for no call is that they don't have time to prepare. And, the only reason I can come up with that seems logical as to why they don't have time to prepare is that they are busy doing something else. So, what else could take up their Friday - Monday that would be more important than preparing for a quarterly call? I believe they received clearance from the SEC for their S-4/A (not a big stretch since the last changes were so modest) and they are busy with all the documentation necessary to get the BRY deal back on track and don't have time to prepare for a call right now. That would also explain the rush to get the 10Q filed since this data needs to go into all the documents, including the Proxy. Maybe someone else can come up with another explanation for the sudden urgency to file the 10Q with no conference call, but this is the only one that I have come up with that explains both. GLTA
I must admit to sharing the question as to whether the inquiry is over and hopeful the Company can clarify this point next week (though they truly may not know either). However, even if not, I think based on the changes to the S-4/A, the most the SEC might do is force LINE to restate its prior year financials relating to put hedges and, if so, it would have no effect on the distribution (so I don't care if they do, though prefer they not).
Either way, I would be surprised if the BRY deal isn't completed at this point. I think LINE has a much stronger hand to play than people give them credit for and BRY management wants this deal as badly as they do. As such, one way LINE could be moving is to simply tell BRY to get on board with the deal or terminate it, but it's not changing. If this is the message, the BRY stock will come in some to reflect that the higher bid isn't coming.
Alternatively, LINE could up the bid, but that doesn't assure the stock prices will come together to support shareholder approval any more than not raising the bid assures it. The only reason to raise the bid is if they truly believe BRY will walk if they don't. While I don't think BRY will walk, maybe they do and they are in a much better position than me to make that call.
I look at it this way. When it looked like the SEC might never clear the S-4 and the distribution was in jeopardy due to a couple of weak quarters, the stock traded in the mid-to-upper $20 range. With the S-4/A cleared, we now know LINE has access to the capital markets again. And, the BRY deal, while perhaps expensive is said to be cash flow positive, along with a solid quarter and guidance should further secure, if not enhance, the distribution. So, regardless of the way the stock trades in the next couple of months, unless we get a negative surprise from the SEC or the deal, we should head back up over time into the mid-$30's and move on from there, so long as interest rates stay low and oil prices reasonably high. In the meantime, enjoy the monthly distributions. GLTA