NEW YORK (TheStreet) -- Linn Energy (LINE) shares are down 8.54% to $11.35 in market trading on Tuesday after the independent oil and natural gas company priced its secondary offering of 16 million shares at $11.79 per share today.
The Houston-based company expects to receive net proceeds between $181 million and $208 million, with the top line being reachable if the underwriters for the offering elect to exercise their option to purchase additional shares in full.
The proceeds from the offering will be used to pay down the debt the company incurred while funding the open market repurchase of its senior notes.
The offering is expected to settle May 22.
TheStreet Ratings team rates LINN ENERGY LLC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate LINN ENERGY LLC (LINE) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 297.4% when compared to the same quarter one year ago, falling from -$85.34 million to -$339.16 million.
- The debt-to-equity ratio is very high at 2.52 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.49, which clearly demonstrates the inability to cover short-term cash needs.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LINN ENERGY LLC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for LINN ENERGY LLC is currently extremely low, coming in at 8.13%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -37.00% is significantly below that of the industry average.
- Net operating cash flow has decreased to $374.70 million or 13.75% when compared to the same quarter last year. Despite a decrease in cash flow LINN ENERGY LLC is still fairing well by exceeding its industry average cash flow growth rate of -53.10%.
- You can view the full analysis from the report here: LINE Ratings Report