Below please find an update on the total number of shares and units sold short across the four Kinder Morgan entities. The following chart shows the total number of units or shares sold short for each name since September of 2012. The data is somewhat delayed, typically 10-12 days.
(Click to view)
(Click to view)
The vertical black dashed lines under the “X’s” mark the Ex-Dividend or Ex-Distribution dates for the entities. You may notice that some of the short positions tend to get covered prior to the Ex dates so they do not have to pay the dividends/distributions. Technically the data is as of the close on the date shown and not continuous data for every day, so the entire short position could be covered prior to the Ex date and then put back on the following day.
Two week change in the amount of units/shares sold short:
- KMI: Up 250.9%
- KMP: Down 6.0%
- KMR: Up 92.5%
- EPB: Up 36.0%
If you are a retail investor and shorting these names, please pay attention to the Ex-Dividend / Ex-Distribution dates so you don’t also have to pay the dividend/distributions. In addition, you should also take into account your additional cost to borrow each security from your broker. Many MLPs are typically “Hard to Borrow” so assuming your broker finds you units to borrow to short they may charge a high rate.
NOTE: The large increase in KMI was somewhat expected, as I mentioned in the last Kinder Morgan short trend post; however, I am slightly surprised by the large increase and new high in the KMR short position. It seems like the “easiest” way to play the M&A Arb game with this transaction is to short KMI and go long KMR because KMR does not generate a K-1 and the exchange ratio for that part of the deal is all KMI stock and no cash in exchange for KMR shares.
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