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Plains GP Holdings filed confidentially for its IPO in late July of 2013. The company is an affiliate of Houston-based Plains All American Pipeline, which transports, stores and sells oil and natural gas. It's estimated that PAA moves roughly three and a half million barrels of crude and natural gas through its pipelines per day and analysts expect it to continue to grow its operations in North America.
Nick Einhorn an analyst at Renaissance Capital explains that Plains GP Holdings offers investors a leveraged play on Plains All American's distribution growth through its incentive distribution rights.
"Essentially, a 10-percent increase in PAA's distribution per share will result in a 20% increase in Plains GP's cash flow. Furthermore, Plains GP's treatment as a C-corporation for tax purposes may appeal to investors that do not typically invest in limited partnerships like PAA due to the K-1 forms required," says Einhorn.
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The motivation to go public from the company's standpoint is that the proceeds raised from the IPO will provide liquidity to Plains GP's existing shareholders. Companies including "Occidental Petroleum, The Energy and Minerals Group, and Kayne Anderson Capital Advisors, as well as the executives, will receive the IPO proceeds," says Einhorn.
How will publicly-traded shares of Plains GP Holdings impact the master limited partnership, Planes All American?
"There is no obvious reason why shares of the limited partnership would be hurt by the general partnership's IPO. The last three general partnerships to go public: Western Gas Equity Partners, Kinder Morgan, and Targa Resources do not seem to have had a direct negative effect on their corresponding limited partnerships WES, KMP and NGLS," said Einhorn.
The underwriters of the Plains GP Holdings deal include Barclays, Goldman Sachs, JP Morgan.
Year to date, Plains All American is up more than 11 percent, while the S&P Large Cap Energy Sector has seen gains of more than 15 percent.
—By CNBC's Jackie DeAngelis. Follow her on Twitter @JackieDeAngelis.