Grizzly Bear
Long/short equity, contrarian

Why I Believe PetroLogistics' Share Price Will Fall

The Thesis

I believe that the unit price for PetroLogistics (NYSE:PDH) will decline by 30%+ over the next few months as a result of dramatically lower near-term distributions, and that the stock will likely continue to fall as the market realizes that the abnormal profits realized in 2013 are unlikely to be repeated in the foreseeable future. I believe that the full-year 2014 distribution will struggle to reach $1.05, representing a 35%+ decrease from the distributions paid last year. Based on comparable variable distribution MLPs and the company's own trading history, a 12.5% yield would price the units at $8.80, 23% below their current price. Should the current propane shortage worsen, causing prices to stay high...

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