Investor Preferences in C-Corp Conversion:
- No dilution. Share issuance of any kind should be prohibited in the corporate charter. Any changes to this policy should require a significant majority vote.
- Share repurchases should remain the primary method of returning capital.
- If a dividend is necessary, it should be regular and consistent.
- Board members, including originating board members, must be voted upon by shareholders. Board terms should be of reasonable length.
- Board should be of reasonable size so as to function healthily at all times. Independent directors should outnumber executive members.
- Remain in “business of going out of business”. Primary duty of corporation is return of capital via royalty collections and asset sales.
- State limitations on additional business activity such as new business ventures and additional land/royally acquisitions.
- Executives shall be required to purchase shares via dedicated cash compensation and/or company loans to ensure that shareholder and management incentives are aligned. Executives should be required to attain and maintain some material level of ownership.
- Executive compensation should be simple and oriented towards long term results.
- Stock shall be split regularly so as to facilitate liquidity for repurchases.
- Transparency in reporting of results and material events should be commensurate with those expected of a $5B+ publicly traded corporation.
- Corporation must hold an annual meetings and be regularly open to investor communcation.
The list above was kept short deliberately. Spin-offs, head count, and other business decisions (in my opinion) should be the responsibility of directors and management with interests and incentives that are aligned with those of shareholders (TPL 2.0).
Diversifying the revenue base. Does TPL get a royalty on the power produced?
RWE has started commercial operations at its 100MW West of the Pecos solar farm in Texas.
The project is located on 283 hectares of land in Reeves County leased from Texas Pacific Land Trust and Texas General Land Office.
It comprises nearly 350,000 solar modules and is RWE’s first photovoltaic project in Texas.
West of the Pecos has a long-term power purchase agreement with SK E&S LNG for 50MW of the output.
Located 75miles (120.7km) southwest of Midland-Odessa, the solar plant is spread across on more than 700 acres of land leased from Texas Pacific Land Trust and Texas General Land Office within the county and is powered by nearly 350,000 solar modules.
RWE Renewables CEO Anja-Isabel Dotzenrath said: “The completion of our largest solar project in the U.S. is another good example of RWE’s continued success in the U.S. market and our effort to diversify our portfolio across technologies. With a development pipeline of more than 10 GW our strategy for renewables in the U.S. is geared for growth.
“A very big thank you to all involved employees and partners, who made an excellent job in the smooth execution of this project. West of the Pecos underscores our commitment to being the partner of choice for the transition to a lower-carbon future.”
Nice find here from John, a reader of the blog. Good one for the archives.
Mr. Buffett argues that it not realistic to value real estate holding companies at the grossed up price of their last fractional/marginal sale. Hard to disagree. What we are seeing now, in my opinion, is the market paying attention to the top and bottom lines of the income statement.
What’s the max?
We believe that many of the core positions in the Fund are actually both true growth and value investments. As an example, Texas Pacific Land Trust has grown sales and net income at a 50% compound annual rate over the trailing five years. A statistical review might conclude that this is a “reasonably priced” growth stock, trading at approximately 16.5x trailing earnings over the past twelve months. However, this earnings figure includes a sizeable one‐time land sale and is not directly relevant to the run‐rate cash flow of the business. That being said, a bottom‐up valuation of the company’s land portfolio and related oil and gas, easement and water businesses suggests a substantial discount to net asset value, given that less than 10% of the company’s core assets have been exploited to date.
Thanks to Gary for this link!
Deadline extended. Looks like progress.
The Committee has continued its work following its update release of December 4 and is continuing to consult with the Trust’s advisors regarding steps to effectuate the Trust’s conversion or reorganization to a corporate structure. As part of this work, the Committee has been evaluating corporate governance terms that may be reflected in the organizational documents of the resulting corporation to be proposed as part of the Committee’s final recommendations to the Trustees. In light of the Committee’s positive ongoing deliberations, the Committee has extended its term through the end of January 2020.
Have a cool Yule! Wishing you all prosperity in 2020.