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Linn Energy (LINE -14.4%) and LinnCo (LNCO -12.2%) are downgraded by at least three firms...

Linn Energy (LINE -14.4%) and LinnCo (LNCO -12.2%) are downgraded by at least three firms following the disclosure of the informal SEC inquiry. J.P. Morgan expects significant volatility in LINE until the SEC inquiry is resolved and the impact on the Berry (BRY -5.2%) transaction is known. Howard Weil thinks the SEC could wind up forcing LINN to restate non-GAAP discretionary cash flow (Briefing.com).
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Comments (18)
  • rlp2451
    , contributor
    Comments (6836) | Send Message
     
    Where does it say that JPM "thinks the SEC could wind up forcing LINN to restate non-GAAP discretionary cash flow?"
    2 Jul 2013, 12:38 PM Reply Like
  • DJOLY
    , contributor
    Comment (1) | Send Message
     
    leadership is solid buy buy buy
    2 Jul 2013, 01:03 PM Reply Like
  • bvan123
    , contributor
    Comments (2) | Send Message
     
    Wells Fargo thinks the SEC could wind up forcing LINN to restate non-GAAP discretionary cash flow.
    2 Jul 2013, 01:03 PM Reply Like
  • Clayton Rulli
    , contributor
    Comments (2993) | Send Message
     
    Even if LINN did restate, do you think something will be uncovered?
    2 Jul 2013, 01:06 PM Reply Like
  • stvrob_63
    , contributor
    Comments (1112) | Send Message
     
    I can't find a link to either JPM or WFC saying "the SEC could wind up forcing LINN to restate non-GAAP discretionary cash flow".
    2 Jul 2013, 01:10 PM Reply Like
  • hdiesel
    , contributor
    Comments (25) | Send Message
     
    There are several potential outcomes, and the money-center analysts do need to cover their behinds. That said the news is being over-reacted to based on what facts I have read thus far. Holders may want to hedge longs with put options to sleep better while still keeping their upside on the table should all this come out positively for LINN/LNCO.
    2 Jul 2013, 01:29 PM Reply Like
  • Junkbond guy
    , contributor
    Comments (110) | Send Message
     
    GAAP is generally accepted accounting principles. So having a company restate GAAP cash flows will make it restate cash flows so that it meets generally accepted accounting principles. Non-GAAP cash flows means that the cash flows do not correspond to generally accepted accounting principles. So if the SEC does what JPM and Wells Fargo says they are going to do and make Line restate its non-GAAP discretionary cash flow numbers, what does it make the non-GAAP numbers correspond to? By it's very definition its discretionary cash flows does not correspond with generally accepted accounting principles.
    2 Jul 2013, 01:31 PM Reply Like
  • toomuchgas
    , contributor
    Comments (720) | Send Message
     
    Safest way to play on the long side is to buy BRY.
    2 Jul 2013, 01:38 PM Reply Like
  • Windwood Trader
    , contributor
    Comments (3369) | Send Message
     
    Yep-
    They may be off the pace today but it's a win for them to have the deal go through.
    2 Jul 2013, 01:43 PM Reply Like
  • Todd Johnson
    , contributor
    Comments (6954) | Send Message
     
    This news is a few months old. Maybe Cramer will press the red "buy, buy, buy" button. There is more to the story.
    2 Jul 2013, 02:13 PM Reply Like
  • rlp2451
    , contributor
    Comments (6836) | Send Message
     
    Todd the news about the SEC informal inquiry came out last night.
    2 Jul 2013, 02:36 PM Reply Like
  • smurf
    , contributor
    Comments (4587) | Send Message
     
    Will move to dump LNCO on the first dead cat bounce.

     

    Should have remembered the late Marty Zweig's admonition about not fighting the tape. In the future will avoid all these translucent outfits who rely on paper shenanigans for their profits. Hate learning these expensive lessons!

     

    Where are all the Pollyannas talking about "backing up the truck"?
    2 Jul 2013, 02:48 PM Reply Like
  • arthur_bishop1972
    , contributor
    Comments (2780) | Send Message
     
    It still sounds like there are some powerful forces that are conspiring to bring LINE down (not that some of it may be true, but...).

     

    At the very least, the SEC's ruling should put this dog and pony show to sleep, once and for all (sorry to mix metaphors...lol).
    2 Jul 2013, 02:48 PM Reply Like
  • Ken Veit
    , contributor
    Comments (19) | Send Message
     
    GAAP is about what you have to tell investors. Non-GAAP is what you want to tell investors. How can the SEC force LINN to not say what non-GAAP is all about? We still have free speech in this country.

     

    The SEC could force LINN to restate GAAP earnings, but that has no impact on cash flow.
    2 Jul 2013, 02:58 PM Reply Like
  • huthutho
    , contributor
    Comments (269) | Send Message
     
    Hedgeye analyst's response to Cooperman's statement:
    http://bit.ly/18tHeHu

     

    Disclosure: long LNCO.
    2 Jul 2013, 03:21 PM Reply Like
  • Bryce_in_TX
    , contributor
    Comments (3737) | Send Message
     
    I have to scratch my head over Bary and Hedgeye. They sound like smart guys, and they state they think LINE's GAAP financials are accurate, for the most part, no material disagreements it doesn't appear on that point.

     

    Yet it doesn't appear they comprehend that unrealized gains/losses on the hedges are mostly bogus and should be backed out of Net Income or Loss. Bary, in his article, states LINE has had Net Losses in the last 3 our to 4 years. ????? On a GAAP basis, yes, but GAAP fas 133 causes material distortions in Net Income/Loss with a company like LINE. The GAAP numbers are largely bogus. Hedgeye thinks the same thing as Bary in this regard. On this subject, these guys don't have a clue. I am of the opinion LINE had no Net Losses in the last 4 years. Below is an example of using a derivative as a hedge. Note situation 3. To the extent the hedge is effective, any interim unrealized gains/losses on the derivative before it is settled are bogus once the derivative is settled. These guys do not understand the dynamics of how the hedges work. Surely that can't be, but that's the way it appears from what they write.

     

    http://bit.ly/ZH3fKU
    2 Jul 2013, 04:01 PM Reply Like
  • Humble Value Miner
    , contributor
    Comments (440) | Send Message
     
    or they understand but they know that this is complicated, so most people will not, so they are trying. So far the attempt to drive down prices (and not only for LINE) works...
    2 Jul 2013, 04:56 PM Reply Like
  • Robert Geraci
    , contributor
    Comments (2) | Send Message
     
    It doesn't in the referenced article. Copy and paste must be hard for certain people. A ton of auditors have looked at this including Berry, so hard to see why this is still an issue except to the shorts. The ex date is I think this Friday for the first monthly divi from LINE and LNCO, so the shorts are really pulling out the stops.
    2 Jul 2013, 10:11 PM Reply Like
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