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Hedgeye Converting to a Master Limited Partnership (MLP)

Independent Investment Research Firm Aims To Take Advantage of MLP Structural Advantages

FOR IMMEDIATE RELEASE

 

STAMFORD, Conn., April 1, 2016 -- Hedgeye Risk Management announced today that it has officially converted to a Master Limited Partnership (MLP) effective immediately. This corporate structure conversion occurs concurrently with Hedgeye’s acquisition of all the assets of the “Old Walla-Balla Oil Field” headquartered in Lower Manhattan, with oil fields scattered across the southeast United States.

 

The main objective of Hedgeye’s corporate conversion is to increase tax efficiency and diversify the research firm’s growing revenue base.  In addition, like many MLPs before Hedgeye, the firm’s new low cost of capital will allow it to aggressively overpay for declining assets.

 

“This was a very simple decision,” said Hedgeye President Michael Blum. “Our Energy analyst Kevin Kaiser did extensive work featured in Barron's on LINN Energy, Kinder Morgan and Summit Midstream Partners which made us well aware of myriad risks to the MLP structure.  And yet, in the midst of the miasma, we saw one clear, obvious benefit too good to pass up—the ability of investment bankers to sell the dream of a yield in a zero interest rate universe.” Blum said.

 

The new Hedgeye MLP will issue a dividend to holders of both Hedgeye General Partnership (GP) and Hedgeye Limited Partnership (LP).

 

  • Holders of the GP units will receive a preferred dividend yield of 18% securitized by gold stored in the Company’s vault. 
  • Holders of the LP units will receive an unsecured dividend yielding 5%.  It is expected the initial payout ratio on the LP dividend will be 51%, based on pro-forma calculation excluding all expenses and capital expenditures.  (On a cash basis, the payout ratio is expected to be north of 300%)
  • All holders will receive a $25 gift certificate to Chipotle provided by Hedgeye Restaurants Sector Head Howard Penney.

 

“Look, like most things Old Wall, we recognize that these oil fields are a declining asset,” said Hedgeye Chief Financial Officer Todd Jordan.  “But we also recognize that our firm’s core revenues can’t continue growing at 30%+ per annum organically forever. This combination of tax savings and proceeds will allow us to further diversify our revenue and return cash to shareholders via a non-GAAP distribution set at a yield of 18%. Maybe 52%. It’s not entirely clear yet."

 

"Except the Chipotle gift card," Jordan added. "They’ll definitely get the gift card.”

 

***Proceeds from the bought deal coinciding with transaction will be used for the following purposes:

 

1) Start a Hedgeye Gear apparel business which has been launched in its Beta form.

Hedgeye Converting to a Master Limited Partnership (MLP) - z h gear 1

 

2) Wholly acquire the Charlestown Chiefs of the Federal League and move the team to Stamford, CT.

Hedgeye Converting to a Master Limited Partnership (MLP) - z ch


3) Acquire the yacht Octopussy under the auspices of the Jones Act and relocate our offices to its main cabin.

 

ABOUT OLD WALLA BALLA

The firm is a declining, conflicted, and compromised asset based in lower Manhattans in the area more commonly known as “Wall Street.”

 

ABOUT HEDGEYE RISK MANAGEMENT

 

Hedgeye Risk Management is an independent investment research and media firm. Focused exclusively on generating and delivering actionable investment ideas in a proven buy-side process, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. The Hedgeye team features some of the world's most regarded research analysts, all with buy-side experience, covering Macro, Financials, Energy, Healthcare, Retail, Gaming, Lodging & Leisure (GLL), Restaurants, Industrials, Consumer Staples, Internet & Media, Housing, and Materials.

 

CONTACT: Jenny

867-5309


Hedgeye Converting to a Master Limited Partnership (MLP)

Dear Subscriber,

 

In lieu of the Early Look today, we would like to use this special opportunity to officially announce the big news of a very exciting corporate development.  While additional details follow in the press release below, please note that effective immediately, Hedgeye Risk Management, LLC will be converting to a Master Limited Partnership (“MLP”). 

 

There will be no change whatsoever in your services.

 

Regards,

 

Daryl Jones

Director of Research and Head of Sales

 

 

Independent Investment Research Firm Aims To Take Advantage of MLP Structural Advantages

FOR IMMEDIATE RELEASE

 

STAMFORD, Conn., April 1, 2016 -- Hedgeye Risk Management announced today that it has officially converted to a Master Limited Partnership (MLP) effective immediately. This corporate structure conversion occurs concurrently with Hedgeye’s acquisition of all the assets of the “Old Walla-Balla Oil Field” headquartered in Lower Manhattan, with oil fields scattered across the southeast United States.

 

The main objective of Hedgeye’s corporate conversion is to increase tax efficiency and diversify the research firm’s growing revenue base.  In addition, like many MLPs before Hedgeye, the firm’s new low cost of capital will allow it to aggressively overpay for declining assets.

 

“This was a very simple decision,” said Hedgeye President Michael Blum. “Our Energy analyst Kevin Kaiser did extensive work featured in Barron's on LINN Energy, Kinder Morgan and Summit Midstream Partners which made us well aware of myriad risks to the MLP structure.  And yet, in the midst of the miasma, we saw one clear, obvious benefit too good to pass up—the ability of investment bankers to sell the dream of a yield in a zero interest rate universe.” Blum said.

 

The new Hedgeye MLP will issue a dividend to holders of both Hedgeye General Partnership (GP) and Hedgeye Limited Partnership (LP).

 

  • Holders of the GP units will receive a preferred dividend yield of 18% securitized by gold stored in the Company’s vault. 
  • Holders of the LP units will receive an unsecured dividend yielding 5%.  It is expected the initial payout ratio on the LP dividend will be 51%, based on pro-forma calculation excluding all expenses and capital expenditures.  (On a cash basis, the payout ratio is expected to be north of 300%)
  • All holders will receive a $25 gift certificate to Chipotle provided by Hedgeye Restaurants Sector Head Howard Penney.

 

“Look, like most things Old Wall, we recognize that these oil fields are a declining asset,” said Hedgeye Chief Financial Officer Todd Jordan.  “But we also recognize that our firm’s core revenues can’t continue growing at 30%+ per annum organically forever. This combination of tax savings and proceeds will allow us to further diversify our revenue and return cash to shareholders via a non-GAAP distribution set at a yield of 18%. Maybe 52%. It’s not entirely clear yet."

 

"Except the Chipotle gift card," Jordan added. "They’ll definitely get the gift card.”

 

***Proceeds from the bought deal coinciding with transaction will be used for the following purposes:

 

1) Start a Hedgeye Gear apparel business which has been launched in its Beta form.

Hedgeye Converting to a Master Limited Partnership (MLP) - z h gear 1

 

2) Wholly acquire the Charlestown Chiefs of the Federal League and move the team to Stamford, CT.

Hedgeye Converting to a Master Limited Partnership (MLP) - z ch


3) Acquire the yacht Octopussy under the auspices of the Jones Act and relocate our offices to its main cabin.

Hedgeye Converting to a Master Limited Partnership (MLP) - yacht

 

ABOUT OLD WALLA BALLA

The firm is a declining, conflicted, and compromised asset based in lower Manhattans in the area more commonly known as “Wall Street.”

 

ABOUT HEDGEYE RISK MANAGEMENT

 

Hedgeye Risk Management is an independent investment research and media firm. Focused exclusively on generating and delivering actionable investment ideas in a proven buy-side process, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. The Hedgeye team features some of the world's most regarded research analysts, all with buy-side experience, covering Macro, Financials, Energy, Healthcare, Retail, Gaming, Lodging & Leisure (GLL), Restaurants, Industrials, Consumer Staples, Internet & Media, Housing, and Materials.

 

CONTACT: Jenny



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