NEW YORK (TheStreet) -- LinnCo (LNCO) stock is down 31.85% to $0.893 on heavy trading volume this afternoon, as its affiliate Linn Energy (LINE) might merge with the company to protect its own investors from a tax hit.
Linn Energy is considering a debt restructuring or possible bankruptcy amid plunging oil prices, sources told the Wall Street Journal.
If the oil and natural gas company goes through with either of these options, its investors could owe taxes on debt that is forgiven in a bankruptcy or out-of-court restructuring, since it is taxed like a master limited partnership, the Journal adds. MLPs pass tax burdens and a share of their income to investors rather than paying corporate taxes themselves.
To shield its investors from the tax hit, Linn Energy might pursue options such as merging with LinnCo or letting investors trade Linn units for LinnCo shares before a restructuring.
About 10.61 million shares of LinnCo have been traded so far today, well above the company's average trading volume of roughly 4.78 million shares per day.
Separately, TheStreet Ratings team rates the stock as a "sell" with a ratings score of D-.
LinnCo's weaknesses include its deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.
You can view the full analysis from the report here: LNCO
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.