Why LINN Energy LLC and LinnCo LLC Crashed More than 10% Today

Today's rout in oil prices is behind today's selloff in shares of LINN Energy LLC and LinnCo LLC.

Matthew DiLallo
Matthew DiLallo
Dec 8, 2014 at 5:50PM
Energy, Materials, and Utilities

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Units of LINN Energy LLC (OTC:LINEQ) and shares of LinnCo (UNKNOWN:LNCO.DL) sold off heavily today. As we see in the following chart both are down more than 10% on the day.

LINE Price Chart

LINE Price data by YCharts

The cause of the sell off was sparked by another big drop in oil prices, which are down another 4.2% on the day. Today's sell off in oil prices was due to more bearish sentiment from analysts who continue to cut oil price forecasts.

So What: Today's sell-off in LINN Energy and LinnCo is just more panic selling as crude oil prices have yet to find a bottom. Investors worry that not only could oil prices go even lower, but that low oil prices are here to stay. While LINN Energy is fairly well insulated against the short term drop in oil prices, its cash flow will take a hit if oil prices stay low for a more than two years.

Now What: There's really not much investors can do in times like these. When the market panics stocks relating to that panic are sold off. Companies with higher debt, which is the case with LINN Energy, tend to be even more volatile during these times as investors fear the worst case scenario of a future bankruptcy. While that scenario is a risk at any company, more often than not these panics pass and business goes on as usual. That's the more likely outcome for LINN Energy.