RE:RE:RE:RE:RE:RE:RE:RE:Enb will likely get to 50.00 now....imhoShare prices are crucial. The Canadian ENB dropdowns are puchased by ENF (a "sponsored vehicle"), and ENF may need to issue equity to fund the purchase. If ENF's share price is low, then dropdowns become too dilutive; ENB has recognized this problem and told us so.
The US tax changes triggered lower share prices in all of the sponsored vehicles. You'd expect ENF wouldn't be hit as hard the US MLP's, and you'd be right, but they were still hit because ENB as a whole was hit. And one of the tax changes was more beneificial to the US MLP's than to ENF.
The chain of effect: (1) US tax changes, including FERC --> (2) share prices fall --> (3) dropdowns become too dilutive. Rising interest rates are in there too, so you could replace (1) with "tax changes and rising interest rates". Rising rates alone might eventually have changed ENB's perspective on using ENF for funding, but there's no doubt the tax changes sped things up.
I think this is not well-understood among investors, and I do not consider myself highly knowledgeable about all the aspects of ENB's equity relationships with its sponsored vehicles. If someone is able to improve/correct/expand anything above, please do.
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Sadie222 wrote:
I don’t know the financial mechanics of the drop-downs, but it was the taxation changes to the LPs that forced the end of drop-downs, not share pricing. The are a bunch of them involved in the fund. Unless the taxation rules revert, I don’t see a resumption of drop-downs. ENF would have to grow the same way as everyone else.