LinnCo LLC, created to help partnership Linn Energy LLC attract more institutional investors, advanced in its debut after raising $1.1 billion in an initial public offering priced below the proposed range.
The shares climbed 4.8 percent to $38.26 at the close in New York. Yesterday LinnCo sold 30.25 million shares at $36.50 each. The company had planned to offer the shares within 5 percent of Linn’s last price before the sale, regulatory filings show. Linn closed at $40.01 yesterday, making the range $38.01 to $42.01.
Each share of LinnCo represents a unit in Linn Energy, and LinnCo will own 13.2 percent of the partnership, the Houston-based company said in an Oct. 2 filing. Linn will use the proceeds to pay down debt, according to filings. Barclays Plc, Royal Bank of Canada and Wells Fargo & Co. served as lead managers on the sale for LinnCo, whose shares are listed under the ticker LNCO on the Nasdaq Stock Market.
Linn is an oil-and-natural gas producer focused on buying older fields that still have stable production. Because it is similar to a master-limited partnership, Linn avoids federal income taxes while passing on most of its cash flow to its unitholders. LinnCo is structured as a corporation, which the company said will allow it to attract investment from pension funds and other investors who are sometimes barred from buying partnerships.
LinnCo’s dividends will be based on Linn’s payouts. If Linn maintains its $2.90 annual payment per unit, LinnCo shareholders will earn $2.75 to $2.84 after taxes, according to filings.
Linn has increased production more than fourfold in five years and almost doubled its reserves in 2011, according to data compiled by Bloomberg. Linn agreed to buy gas fields in Kansas and Wyoming from BP Plc this year for $2.23 billion.
Linn and other tax-advantaged partnerships bought 10 percent of the oil-producing property sold in the U.S. through August and 26 percent of the gas-producing property.