At one point this morning, the discount was over 8%. I bought some more at 31.39 and suspect I got some free money.
I sold some too a couple days after the deal was announced -- mostly because I was getting very overweight in KMx and was looking for an excuse/opportunity to lighten up -- but am not getting worked up about the decline since for the balance of my shares. Part of the decline is that the post-deal pop was overdone; part of it is that all the MLP funds and indices need to sell out of KMP/KMR since they will no longer be MLPs; and I'm sure part of it is selling by KMP holders who are not happy about the de facto distribution cut. Usually when your distribution gets cut your unit price tanks, I'm sure many KMP/KMR holders are taking advantage of the post-deal pop to get out.
I don't think there's any question that the options are a better value than the warrants. RIght now the longest-dated option are the Jan 2016 expirations. The $40 strikes are a bit more than half the cost of the warrants. Once the stock gets in the money by $5 or so, the time premium essentially vanishes -- right now the 32.50 strikes are more or less premium-less. If you think the stock will move into the $45 area, makes a lot more sense to buy the Jan 2016 40 calls for half the price of the warrants, and in Jan 2016 just roll them over into 2017 40 calls. There likely will be no premium and all you'll pay is the transaction costs. But you can buy twice as many. On the other hand, you're cutting your downside risk in half if the price collapses.
Best argument for the warrants is if you think KMI will be actively repurchasing them, the price will remain artificially inflated... but that opens the risk that the warrant price converges with the options as soon as the 2017 options are available.
anyone know what the rate is? the prospectus simply leaves it blank. (not sure what the point is of issuing a 95-page prospectus that doesn't include the coupon rate, but I digress...)
watch short term rates
by the time short-term rates actually start rising, HCLP's distribution will be 30% higher than it is now.
Another vital number that you have to look at -- that, surprisingly, lots of people don't -- is the distribution coverage ratio. HCLP has kind of a low yield relative to other MLPs, but the coverage ratio last qtr was 1.54X, so they're only paying out a portion of their cash flow, compared to other MLPs that pay out virtually all of it. If they paid out 90% of cash flow, the yield would be over 5%. That's why the distribution will grow so fast, much of the future expansion is being funded with retained cash.
just being honest. sometime next year my ETE cost basis will hit zero, meaning if I want to sell ETE and buy something else, 25-30% of my principal goes straight into the IRS garbage can, so anything I buy needs to do that much better than ETE would have done to make up the difference. Or, looked at another way, the price needs to drop by 30% before the sale would make sense. Lots of other unitholders are in the same boat, it definitely discourages selling and contributes to the upward pressure on the stock price.
Just hope they do not do a Kinder-type transaction.
The lesson of the Kinder transaction is how much better it is owning the GP vs the LP. Basically the LPs swallowed a large distribution cut (+ the tax hit) as the price of getting rid of the IDR, funding a large dividend increase for the GP holders in the process. It's very likely that any similar transaction in the Energy Transfer family -- and it's certainly not out of the question, especially since they've seen the positive market reaction to the Kinder deal -- would wind up benefiting ETE holders at the expense of ETP unitholders.
avoiding the ungodly capital gains and recaptured income taxes I would have to pay after 5+ years of ridiculous price appreciation.
I could understand people shorting EMES and buying HCLP as a paired trade, especially following the secondary-induced dip.
you misunderstand -- the point of my comment was just how often HCLP has been going up like this -- a year ago it was in the 20's. wasn't at all trying to be negative towards you.
kind of a broken record, isn't it? just copy and re-paste it every couple of weeks.
probably nothing more complicated than the overhang from the recent offering has been absorbed.