EMES MLP IPO Preview May 2013

Emerge Energy Services, LP (ticker EMES) is currently out on its IPO roadshow and looking to raise $150 million by selling 7.5 million common units at a mid-point price of $20 with an indicated mid-point yield of 14%. The distributions will be VARIABLE and the first distribution will be prorated (making the actual NTM cash yield less than 14% even if they hit their projections exactly). They expect to price the deal Wednesday, May 8th.

IMPORTANT: EMES will provide investors with a K-1 (instead of a 1099-DIV), which makes EMES appropriate for taxable accounts. Here is the key language from the “Tax Risks to Common Unitholders” section of the Prospectus (page 58) telling you that it does not belong in an IRA:

Tax-exempt entities and non-U.S. persons face unique tax issues from owning our common units that may result in adverse tax consequences to them.

        Investment in common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts (known as IRAs), and non-U.S. persons raises issues unique to them. For example, virtually all of our income allocated to organizations that are exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them.

        Distributions to non-U.S. persons will be reduced by withholding taxes at the highest applicable effective tax rate, and non-U.S. persons will be required to file federal income tax returns and pay tax on their share of our taxable income. If you are a tax-exempt entity or a non-U.S. person, you should consult a tax advisor before investing in our common units.

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About Philip Trinder

President of MLP Protocol, investor, trader, and proponent of Master Limited Partnerships.
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