market folly

Steve Mandel's hedge fund firm Lone Pine Capital filed a Form 3 and 13G with the SEC regarding shares of Kinder Morgan (KMI).  The hedge fund now owns a sizable chunk of common stock and warrants that they received via their previous position in El Paso (EP).

As pointed out in our new issue of Hedge Fund Wisdom two weeks ago, El Paso was Lone Pine's largest disclosed US equity holding as they were playing the risk arbitrage there.  EP was acquired by Kinder Morgan in a stock/warrant/cash deal.

Lone Pine has now disclosed a 12.9% ownership stake in the company with 71,780,836 shares.  This is represented by 17.6 million shares of common stock and 54.1 million shares via warrants.  The warrants have an expiration date of May 25th, 2017 and a conversion/exercise price of 40.

Numerous other prominent hedge funds were playing this arbitrage as well, so it will be interesting to see who holds on to the new entity (KMI) and who sells their position.  Our premium newsletter drew attention to the sizable stakes in El Paso by Lone Pine, Farallon Capital, Paulson & Co, Omega Advisors, JANA Partners, and Third Point.

Per Google Finance, Kinder Morgan "owns and manages a diversified portfolio of energy transportation and storage assets. The Company operates in five business segments: Products Pipelines-KPM, Natural Gas Pipelines-KMP, CO2-KMP, Terminals-KMP and Kinder Morgan Canada-KMP. The Company through Kinder Morgan Energy Partners, L.P. (KMP) operates or owns an interest in approximately 37,000 miles of pipelines and approximately 180 terminals. These pipelines transport natural gas, refined petroleum products, crude oil, carbon dioxide and other products, and its terminals store petroleum products and chemicals, and handle such products as ethanol, coal, petroleum coke and steel."

In other portfolio activity from Mandel's firm, we've highlighted how Lone Pine has been buying Ulta Salon.