Early Returns

Santa Monica casts white ballot

17,892 sub-shares represented.

Santa Monica Partners L. P. is filing this 13D not merely to strongly support electing Mr. Oliver at the Special Meeting as a trustee because we believe in him and his partners and what they stand for, but we also are doing so now because this is the only chance we may ever again have to elect a trustee as trustees serve until they resign or die. Of course to be clear we support Mr. Oliver because he supports converting the Trust into a Delaware corporation subject to modern governance principles such as:

(1) Annually electing directors which is permitted by the Trust’s Declaration of Trust, dated February 1, 1888
(2) Focusing on the establishment of an experienced team around the Trust’s new water business, with clearly defined goals and objectives, or otherwise considering the separation or sale of such business to a third party with a retained royalty
(3) And of course because of Mr. Oliver’s credentials including being a substantial shareholder and his willingness to put himself out and serve as a trustee of the Trust.
In addition we would think Mr. Oliver might work with the trustees to encourage them to take steps to bring out the value of the company such as:

(4) Encourage the trustees to move with dispatch to convert to “C” Corp. form and with a board of TPL Directors to be able to consider the other steps to bring out the value in the company. It is clear to us that although TPL has many investment attractions its present legal form has kept institutional investors such as ETFs, mutual funds, investment advisors and others from investing in the company. The mere change in business form from trust to corporation could remedy this situation. Is there any reason why trustees oppose institutional ownership or seeing TPL shares appreciate which might follow conversion to corporate form?
(5) Possibility of utilizing the increasing substantial cash flows which could for example well be turned into tax free payments to shareholders by considering a reorganization in which part of the company operations were turned into a passthrough e.g. REIT, entity paying out 90% or more of its income pretax.?

(6) The water business separation is not to be taken lightly. It could mean a spin-off of a business which had triple digit revenue and net profit growth and a high double digit net profit margin in 2018.

(7) Exxon is going to develop Permian basin wells four to five fold in
next 5 years. Other major oil companies have similar plans. A proactive TPL management would share information such as this with its owners and offer its own insights we believe as opposed to its deafening 100 year long silence.


9 thoughts on “Early Returns

  1. In reading seeking alpha, these articles, yahoo finance, etc it appears as though the consensus is with HK and crew. The further we get into this proxy, the more I want to vote with my white cards….

    Liked by 2 people

  2. I’ve been trying to keep up with the latest developments (thank you TPLBlogger!) and agree that all the “smart money” seems to be leaning to votes for Oliver, mine included. There is still a lot of information, however, that I don’t believe has been articulated and that I hope will be fully explained before I cast my votes:
    – Although the timeline goes back to 2016, was there a recent tipping point that led HK and crew to mobilize? My guess is it was the huge comp increases being overseen only by the “compensation committee” consisting of two trustees. That just shouldn’t be.
    – Why is TPL being so bold (foolish) to alienate 25% of the voting block? I would think they would see Murray Stahl and his long-term bullishness and championing of TPL as a net positive, and be concerned if he suddenly reversed course out of frustration and started dumping HK shares.
    – Why is current TPL management/trustees so opposed to the “dissident” nominee? What are they so fearful about? Is it just a matter of trying to preserve the status quo, or are they certain that this nominee will try to strongly influence some strategic decision that they feel is truly not in the best interest of shareholders? Do they really think HK has sinister motives of trying manipulate for short-term gains?The FAQ section on their new website somewhat addresses these questions but doesn’t go nearly far enough.
    – The proposal to consider C-corp conversion and call for annual elections of directors seems to what’s spooking the current trustees the most. They probably realize that this would oust them in the near future if enacted.
    – Will the 5/22 special meeting only be a procedural collection of votes, or will both sides take the opportunity to present their vision for TPL? I might actually get my butt down to Dallas if the latter.

    Liked by 2 people

    • I’m trying to get to the bottom of the 5/22 meeting as well. Venue selection raises suspicion. I assume (maybe wrongly) there will be a material number of votes of stock that is held directly by individuals who can vote their cards directly on location. Most (like me) will be jamming on the vote buttons via Fidelity/Vanguard/etc.


  3. if you have a goose that’s laying golden eggs you leave that thing alone, if the water business makes 9 figure returns why would they want to sell it off and retain royalties and only make maybe 7-8 figure returns?? I thought the point of starting the water business was long term massive profit?

    Liked by 1 person

    • the cost and risks of the golden eggs needs to be determined and evaluated. water is a capital intensive business. it might be great, but more information is needed to make that determination.


  4. They have been operating for over a year isn’t risk evaluation of a water business something they all already looked at and agreed was worth it when they first formed the water business? Has something changed? Since they formed the water business the stocks have gone up tremendously and one would assume they would keep trending up since oil isn’t going anywhere, if Chevron and Exxon are investing heavily they must be pretty confident in the future

    Liked by 1 person

    • My argument on the matter is that investors have little information on the long term projected costs of the business. It’s CAPEX heavy and can’t scale back quickly if oil sells off. That means TPL becomes more cyclical than it used to be. I’m ok with that if the returns are there but I don’t have enough in the way of details to make that judgement.

      Liked by 1 person

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