After final distribution, stock will have no value
Here is what is going to happen:
1: For the next 8 quarters, the company will pay out most of its income as a dividend, probably around $2.50 per share. This will get you a total of around $20 per share in total dividends.
2: After April 2015, there will be a final distribution of the assets, after all liabilities are paid off. That final distribution will probably be in the range of $8 to $10 per share, depending on final expenses.
3: After the final distribution is made, the property reverts to Glacier Park Company, a wholly owned subsidiary of ConocoPhillips Company. The trust does not get any money for that since the assets are reverting due to the trust coming to an end, it is not a sale for value. (The trust ends 20 years after the last survivor of the trust died. That person died in 1995 so 20 years is 2015.)
4: The stock will stop trading, and the stock will be delisted. The 'company' (It is really a trust) will be closed and it will be all over.
At best, it looks like anyone buying the stock today at $73/share will only get about $30 in payments before the stock stops trading in 2015 and the trust closed. The only reason that the stock seems to trade as high as it does is that people do not seem to understand that there is a time limit for the company to be open; they look at the dividend yield or P/E and think it is a good buy. On yahoo there was a message from someone who bought it, then discovered the 2015 limit and sold it at a profit. He was lucky.
The Street (dot) com is not helping matters any because they keep putting alerts out on it as being a good dividend play. It looks like they use some kind of automated stock screener, so the program does not seem to understand that the dividends will only last 8 quarters and then have a final payout. They should fix this since someone could get tricked into paying up for this stock as time goes on since the price should drift down, the yield go up and GNI would look better since the yield would be increasing.
I am short the stock, with the expectation that the stock should trade no higher than $30 today and probably lower since the $30 would need to be discounted for the time value of money to today.
Normally I would not comment so much on a stock that I had shorted, but there is no way getting around the fact that someone is going to lose money on this stock now. Someone is going to be holding or trading the stock as it trades from the current $73 to $30 (or less as the dividends are paid out), until the final distribution in 2015. If the stock price does not move between now and the end in 2015, people will have held onto something that traded at $73 and got only for $30 in return before the 2015 end.
If the stock price would adjust as it should, and then drifted down in step with the dividend payouts, then at least anyone mistakenly buying into the stock would at least have a chance to break even as the stock declines matched the payouts.
I think the worst thing that could happen is for the stock to stay at $73 as April 2015 approaches.
Anyone buying today is probably on track to lose $43 per share for a loss of 58%. If the price does not start dropping to at least match the payouts, someone buying in 2015, just before the final distribution, could lose as much as $65 per share for a loss of 89%.
Louis J. Desy Jr.
LouisDesyjr@gmail.com
