Why Shares of PetroLogistics LP Popped Today

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: Shares of PetroLogistics LP jumped 10% today after agreeing to be bought out.

So what: Flint Hills Resources, LLC, which is a subsidiary of Koch Industries, is buying PetroLogistics for $14.00 per share, or about $2.1 billion. This was a tiny premium from yesterday's closing price of $12.93, and with shares trading higher than $14, the market clearly thinks the deal will be sweetened. 

Now what: The 8% premium is very small, and I wouldn't be surprised if the price was increased; but that's a risky bet today. Also, keep in mind that distributions will keep coming to investors until the deal closes, which is part of the apparent premium. It's probably worth at least taking some chips off the table today in case the buyout falls through, while keeping some exposure in case of a better offer.

Three stock picks to ride America's energy bonanza
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays, while historic amounts of capital expenditures are flooding the industry, will pad your investment nest egg. For this reason, the Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report, "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

The article Why Shares of PetroLogistics LP Popped Today originally appeared on Fool.com.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story