I suspect MLP's will be a slave to the Fed policy re: rates. Higher rates limit the ability to make accretive acquisitions and that is likely what we saw today. Still, LINE/LNCO remain undervalued relative to their assets and their ability to monetize these assets and the distribution appears safe, so I would not sell here either.
No surprise here. They said this is what they wanted to do and the environment was ripe to get it done. I am interested in better understanding the economics, but on the surface, if it is accretive to cash v. without the deal, it is beneficial. Hope they keep trading halted until the market opens in the morning so there can't be any silliness on low volume. More secure distribution should mean a nice pop in stock in time. GLTA
I will leave it up to people who better understand this market to assess your math, but my understanding is that another benefit of the deal will be lower (or reallocated to other opportunities) operating costs from not having to develop the Permian assets. So, whatever the math on the production, the lower investment requirements need to be added on.
I'm on your side, but I don't think any respectable hedge fund was shorting LINE with a 10% distribution and a "known" impending catalyst (this deal, and perhaps now a second one). Obviously, there are shares short and people are responsible for them, but I would be shocked if they are truly professional investors. Most likely, folks like those who listen to Kaiser at Hedgeye (which makes them unprofessional investors to begin with).
Well, not everyone got it because Kaiser at Hedgeye was telling their customers (if they actually have any) to sell or short the stock because it was heading to the low $20's.
Actually, I have no idea what will happen tomorrow on the news. I suspect it will be up, but whether more or less than it is trading after hours, who knows. For example, there are likely still BRY shareholders wanting to capitalize on any news to get out of stock. Regardless, I think LINE with a truly, widely agreed upon, secure distribution could trade at an 8% to 9% distribution rate, or $32.25 to $36.25 in the coming months.
Not clear to me just how much extra cash this deal generates and how much additional extra cash can be realized with the swap or sale of the remaining acreage. However, simply securing the current distribution with a nice cushion should go a long way towards helping get the stock price moving in the right direction. To me, that's more important than if they stretch to raise the distribution only to be relentlessly attacked on whether its sustainable. Of course, I would enjoy both an increase and a cushion.
The 11+ million figure is astounding to me. What would be a person's investment thesis for shorting this stock? Yet, perhaps the nearly 10 days to cover will give us a nice bounce in the coming days. Still, it boggles my mind that anyone would short a 10% payer with known near-term catalysts.
Not disappointing to me. Just bought another 20,000 LNCO at $27.50. It's a gift. What you have to understand is that the professional buyers have to due their diligence on the deal and re-run their models, meet and get approvals before they buy. By next week, that process will have run its course and we should get some support. Today is just knee-jerk reactions.
I read it differently. First, this deal was no surprise, so I would expect some bought shares on the decline fully intending to sell them on the news. Second, you have to give the pros some time to understand the deal, re-run their models and decide what they want to do. It takes hours to days for this to happen. As for me, I consider it a gift and bought an additional 20,000 LNCO at $27.50 this morning. Not because I think the stock is going to soar, but because I believe the distribution if further secured, there remains another Permian transaction catalyst and over time the stock should move up. GLTA
They have defined themselves as a business that works to maximize cash flow from low-decline, well-hedged assets. These were cash consuming near-term, high-decline assets. Only makes sense to swap them. Has nothing to do with desperation. I like the swap and bought an additional block of 20,000 shares in LNCO at $27.50 today.
Don't judge by a day. Many probably invested for the known event and sold regardless of price when it occurred which on a low volume stock makes progress hard. Pros will evaluate and if they decide they like the situation they will support the stock in the coming days/weeks. I bought 20K LNCO today (only because it's lower than LINE) on the lack of price reaction to what I view as a positive development, as the distribution is more secure and there is likely another such deal in the near-term to further secure it. May even get lucky when all the short shares finally get tired of paying the 10% distribution in the face of an improving situation. Over time, the environment remains ripe for the company to pursue their core business model of acquiring accretive assets.
I agree the distribution wasn't in jeopardy and less so now, but don't you think LINE is just sticking to their knitting in trading capital intensive, high decline assets for less capital intensive low decline assets while securing the distribution at the same time?
but I think LINE management is setting the table to surprise the investment community with an increase in the distribution once they swap or sell the balance of the Permian assets. I agree with the Citi analyst who suggests they are underestimating the cash impact of this deal (so they won't get pressured to make any moves on the distribution now), but will be able to reassess on the next deal when they have all the facts of where they end up. Then, they can increase the distribution and get the stock moving aggressively higher with such large short volume in play.
The 10% keeps me willing to be patient to see if the business model unfolds favorably. However, I agree there are benefits to the price being higher, including making accretive acquisitions easier (though they can use debt) and providing more value to margin against.
Who knows. If it's going up because of the split, it should correct because a split is meaningless in reality. The reason stocks tend to go up into and following splits is because they wouldn't split if they weren't confident in the business. I think AAPL is going up because a lot of people believe it's an $800+ stock once the iPhone 6 is released and perhaps closer to $1,000 if a couple of new exciting technologies are introduced and nobody wants to miss the run. Besides, where else can you put your money in tech right now with this much upside? The high growth, high P/E stocks are still at risk of their sell-off resuming and AAPL doesn't have that risk.
BHP CEO forecasts steel production in China to grow from about 780 million tons to 1.1 billion tons in the coming years. If it were to happen, it would seem VALE is in a great position to deliver some nice returns in the coming years with a massive short squeeze at some point along the way.
Sometimes there is a motive (e.g. short or trying to get in before price moves up), and sometimes there is simply incompetence. When i was CEO of a public company in another sector, I would say Credit Suisse was far from top shelf when it came to analyst work, but this is a different industry and quality is very much individualized based on the analyst. Still, I have nearly 300K shares long at an average price of sub-$14 on VALE at this point and between trading and dividends have made decent money the past year. I like what management is doing and I don't think the environment and news flow is going to stay negative for long, so I will hang in for the run up (and the short squeeze). In fact, I like the large short position on this stock because it will help generate oversized gains at some point in the coming quarters.
Good luck, but get out of AMZN if it runs into the event. Lot of people waiting for the run-up so they can short AMZN, including me. The theme of AMZN has not changed. They are determined to lose money and the marketplace has said they won't accept that any longer. While they are getting a reprive for now, the selling will resume in haste post-launch of the smartphone because no one will want to stick around for the loss they will report in the upcoming quarter and the warning of continued losses they will announce (since the smartphone launch will be very expensive for a long time). It's a $250 stock, or lower, though they may continue to find support around $290. I sold my AAPL yesterday at $94.95, but will get back in soon. It is going to $120+ before year-end IMO. No one is valuing their new products and they will have one or more of substance in the Fall.
The analysts missed last quarter because they aren't equipped to estimate OUS markets. Apple may very well continue to surprise so long as China and other markets OUS keep growing faster than historically.