Our market cap drops in excess of the net proceeds from the sale. The market wonders about the integrity and ability of the management running the company. They have put the distribution at greater risk in order to have minimal impact of the over all debt of the company. The earnings might be slightly diluted but the shareholder value if getting destroyed.
Get a downgrade from GS. Panic and sell common stock. Maybe you retire $200 mil in debt from the stock sale. Market reaction is negative. Common drops 15% from Monday opening to time of the stock sale. Cost of capital rises and market cap gets killed more than the value of the new float. Management credibility is further damaged. All of this to put a small dent in the $10 plus billion in debt. Next time give GS a piece of the pie.Let's give this maneuver a name. DUMBCO sounds appropriate.
Look at it this way, unless they cut the distribution, they are paying 9.75% in the form of a distribution to pay off debt. I see that GS is not one of the underwriters and with there sell rating with a $10 target LINN probably panicked to get the deal out in the market place.