Director Clunet Lewis did a cashless (except income taxes) early exercise of all the options he had on sui stock. In each case, he sold enough shares to pay the strike price for each exercise.
He exercised on 1,500 at 32.63 and sold 843 at 58.05 to pay for the 1,500. These expired on 5/20/16, in about 1.5 years.
Also, 1,500 at 29.54 selling 763 to pay for them. These expired on 7/28/20.....somewhat less than 6 years from now.
Also, 1,500 at 37.35 selling 965 to pay for them. These expired 7/27/21.
So, he got 1,929 shares paid for entirely by the profit between 58.05 (the sell prices) and the strike prices (a cashless exercise). All he has to do now is pay income tax on 111,945, the spread between 58.05 and the strike prices.
Obviously, there is a reason or reasons which caused Lewis to conclude he was better off risking his money (shares) now and paying income taxes now than waiting for years with no money at risk.
By exercising now:
He begins collecting dividends.
He starts the holding period on the shares acquired.
He limits his tax hit to a known amount of income and a reasonably certain tax structure. This becomes compelling if he believes the price of the stock will be much higher (with an unknown tax system) as the options approach expiration.
Exercise of in the money options which are about to expire gives no hint on what the insider thinks of future stock prices. It's take your profit or lose it. Early exercise, especially VERY early exercise, to me is a bullish signal.
What I posted was my Excel template for incremental analysis going forward. 3Q 2014 is the base. IMO, the most important analysis to get a hint of the future is to measure the ratios of the increment.......defined as the change from (in this first case) the prior quarter.
To illustrate, after tax cad in 3Q was about 61% of revenue (the way I define revenue by counting NET commissions as revenue). Because many overhead expense items (such as office rent) are plateau expenses, my thesis is that incremental cad will be a higher percentage of incremental revenue, say more than 70%
To illustrate, say rent on 6,000 sq ft of office space is 240,000 per year. That expense is fixed regardless of the amount of revenue which can be produced by people occupying that space. So, unless there is an increase in rent per foot or more space is rented, rent expense in 4Q will be the same as 3Q, even though more revenue is produced. This continues until more space must be rented to accommodate more employees. Then, say, another 4,000 square feet are rented. Rent expense jumps to a new "plateau", regardless of the revenue produced.
So, nsam has a fixed "nut" of overhead to crack. Once cracked (meaning a profit), more of future revenue growth goes to the bottom line. IMO, this kind of analysis is most valuable for a startup such as nsam. That's why I am ahead of the market on nsam. I do the work promptly. Yeah, it's frustrating to watch the price stagnate around 21 when it should be at least 25, but I know the market will catch up when it is spoonfed in very late Feb/very early Mar. I'll just wait.
You are presuming a setback. Let's wait until 12/5 or when I cover, whichever comes first.
That being said, I never claimed to bat 1,000. The only consolation those who trade with me and lose get, is I lost right along with them. Of all the flips I closed this year, only two have been losses....APU and ARCP.....both of which I bought on follow on offering discounts and neither of which I held as core holdings.
The lesson to me.........stick with what you know. I admit I am not doing that with this KMI call.
No, people will be selling because they want tax deferred distributions which become income tax free at death.
They will reinvest in another MLP, not a C-corp.
Plus, the funds and ETFs which hold nothing but MLPs have to sell KMI because it is not a MPL.
I think the sells will far exceed the buys when the new shares of KMI are issued, which is scheduled for 11/26 so they may not appear in statements until 11/28, a day which a lot of people take off to make a long weekend.
Thus, there may be a delayed reaction, so I'll wait until the week of 12/1 to see it play out.
I got almost 30,000 of cash distributions this year from kmp at a yield before announcement of over 6%. It did NOT increase my AGI, off which almost all back door taxes operate and will cost me nothing in 2014 income taxes. I do not want to replace that with 25,000 of qualified dividends which DO increase my AGI and do cost current tax. This on top of a 90,000 tax liability forced on me by Kinder. I would rather the tax money earn 6% (5,400 per year) in some other MLP, but there is nothing I can do about the tax except curse Richard Kinder for screwing all those unit holders who planned to die holding them, me included.
Was HTB at Fidelity with 1.75% annual borrowing fee. Still, they had 1.4 million available to those willing to pay the fee. The fact that it is htb indicates that others expect the same mass dumping as I do.
I suggest selling KMI short NOW for a flip in 7 to 10 trading days.
KMP is a MLP paying tax deferred distributions of a decent yield. The long term plan for such a hold is to die with the position and tax deferred becomes income tax free.
KMI is forcing KMP unit holders into a merger with KMI where most of the consideration will be KMI stock paying a taxable dividend of a lower yield. The merger was approved yesterday and will close 11/26, the day before Thanksgiving after which many people take the Friday off. Consequently, many will not see the KMI shares until Monday, 12/1.
I suspect a flood of KMI selling by KMP unit holders, first to pay involuntary income taxes, and also to reinvest in a different MLP. I'm one of them. I sold all my KMP wednesday and bought more ETP and some ARP, as I want to be ahead of the post-merger crowd. I also sold KMI short today. I expect to be out of it by 12/5 with a nice profit.
Millions and millions of unwanted KMI shares will be forced on KMP unit holders who want tax deferred distributions, not qualified dividends of a lower yield. These shares will be sold in droves as KMP people raise cash for involuntary income taxes as well as to invest in other MLPs.
Not only did I sell all of my KMP for cash Wednesday, I sold KMI short today.
KMP investors who are getting screwed on this deal can get some revenge by making money shorting KMI, imo.
Even those who elect all cash will only get a fraction of what they want. Millions of unwanted KMI shares will be sold to put proceeds, after paying involuntary income taxes, into other MLPs. To be sure, ETP will get its share of the new demand for mlp units, as will other mlps. The selling, however, will be concentrated in one stock....KMI. That's why I just sold it short.