Friday, August 15, 2014

More on KMI and KMP

As discussed previously, all the Kinder Morgan entities are merging into KMI.  I own KMI in the Chump IRA, but also have a full position of KMP in my taxable account.  So I'm wondering, should I sell my KMP while the shares are up, or should I wait for the deal to complete?

Here is the math attached to the deal: 1 KMP unit = 2.1931 shares of KMI + $10.77

Using prices from right now, KMI = $41.40, and KMP = $98.78

Solving for KMP in the above equation = 2.1931($41.40) + $10.77 = $101.56, which around $2.75 more than I get selling today, or roughly 2.5% higher.  The difficulty comes with the two moving parts....if the price of KMI drops, my payout declines, and if the price of KMP rises, it might make sense to sell my shares.

I'm tempted to sell my KMP shares and be done with this, but I want to investigate the tax implications of selling now vs. holding until the deal closes....



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