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Will The Real Valuation Please Stand Up?

|About: ALPS Alerian MLP ETF (AMLP), MLPA
Summary

BX converted from LP to C-Corp and the stock is up 35% due to that.

Some interesting observations can come from that, relevant to MLPs.

MLPs remain significantly undervalued, even the C-corps which have outperformed.

Congratulations to the shareholders of Blackstone (BX).  The management team through the stroke of a pen, created massive value for shareholders (or at least unlocked it).  The company announced a conversion to a C-corp and, voila, it's worth 35% more.  Roughly $15B out of thin air!

I could make a comment on how the market can be manipulated on small volume and therefore the stock market is a hollow shell of its former self.  But  I will (try to) save that for another day.

Instead I want to stay with the here and now.  I have written that the pipeline sector is undervalued.  But I did not delve into the fact that the C-Corps trade higher than the MLPs, perhaps due to K-1s (or lack thereof), or perhaps on hopes of better governance.

No matter, as we found out with BPL, a pipeline with some challenges, the real value is not necessarily what's on the screen.  It was taken out at a 35% premium, and presumably the PE sponsor will still earn their return hurdle, likely 15-20% IRR at that high price.  In that sense, it was "stolen" from us public shareholders who sometimes equate the price with value.  

Nonetheless, here we are.  I'm not going to argue that MLPs should convert, merely, to remind my fellow investors that the price on the screen is not the "real" price.

Of course, when we will see the price on screen match the "real" price is not easy to say.  Somehow pipelines seem to be caught up in the with the worst value underperformance - ever!  Pipelines maybe make too much money and the market doesn't want profits right now.

So, we wait.  At least we get paid to wait, sort of, and watch the price go down.

Disclosure: I am/we are long KYN.

Additional disclosure: I am long a bunch of CEFs in the MLP space