C-Corp Open Thread

7/31/19:  Would love to hear from readers what they would like to see in terms of governance and structure should TPL be converted to a corporation.

Your comments and replies to comments are welcome.

If the comments get substantive we will figure out a way to pin it to the top for a while so that it doesn’t get missed by our new gang of seven.


Update 8/1/19:  Thanks for your submission so far!

I’m going to leave this post at the top of the blog so we can keep the ideas flowing.  In a few days time I will put together a “top 5” or thereabouts that represents the majority of the sentiment.

We’ll keep the thread going until we capture the concensus of readers.  From there we’ll figure out a way to get it into the right hands.


Update 8/7/19:  Keep ’em coming!  Will start aggregating this weekend. 

43 thoughts on “C-Corp Open Thread

  1. One obvious issue is short-long term capital gains taxes on a C-corp conversion. Can tax be deferred or delayed in how a conversion is structured. Would this be similar to an MLP to C-corp conversion?

    Liked by 1 person

    • It is amazing to me how people even on this own board are discounting the importance of having Stahl, EO, and Eric Oliver in the room regarding this. These are some serious long term shareholders who are ‘monitory’ investors as well — in the sense that they also own the same TPL as US!

      Liked by 2 people

  2. Spin-off the water business into its own corporation, and leave the Trust untouched (except reverting the director pay back down, and reducing the CEO/CFO pay to amounts commensurate to a Trust required to simply buy back shares).

    Let people decide if they want to keep the operating business for themselves, and let the rest of us hold the investment we had decided to purchase. A self-liquidating, tontine-like, trust.

    Liked by 1 person

    • If converted to a C-Corp, it can still be ran like a self-liquidating, tontine like trust. Except, if converted, you remove the piercing of the veil risk factor, which currently exists and likely keeps several institutional shareholders, who would otherwise be owners, out of the shareholder base.

      Liked by 1 person

  3. My C-corp wish list:

    1. No new shares to be issued, either to employees by awards or options. Debt cannot be incurred by the corporation either.
    2. Trustees become a 3 person board of directors. First year all directors run for office, 3 year term. First election has terms of three, two and one year positions, that way one position is up for election yearly. Cap directors at 3 forever.
    3. Requirement that directors take 50% of their pay in shares purchased on the open market, with a five year lockup from when purchased.
    4. Requirement that executives have two years to get shareholding up to 25% of their pay over a five year moving average of what they were/are paid. Shares bought on the open market. This is similar to companies like Nike. Cap executives at two (CEO, CFO) forever.
    5. Annual meetings in person, in Dallas, Texas.
    6. Written company policy on share repurchases thst is part of the corporate charter. (ie: 30% of net income will buy back shares quarterly)
    7. Spin off the water business.
    8. Anything big requires a shareholder vote. (ie: the recent 100 million land sale that was done as a tax advantaged land swap should be shareholder approved.)
    9. Cap employees at a maximum of 50. Believe we are above this due to water business, so once spun off, a cap will make it hard for the company to do the usual sort of low value activities that happen when its an agency and not owner mentality.
    10. Have a dividend policy, also made part of the corporate charter. Ok with a yearly dividend as long as its small. Something like dividends to not exceed 5% of company net income per year. My bias is its so much more efficient to have the company buy back and retire shares.

    Liked by 5 people

  4. No stock options or grants PERIOD. Board to be 5 members, all to be elected, 2 to 1 and 2 year terms, and one to 3 year term. Share splits to make it more tradable, all land sales/swaps to be approved by at least 3 Board members, monthly oil and gas flow volumes and number of producing and drilled but not producing wells published on a website. We should also get notice of all water contracts. Hey, it’s MY wish list, so I’m going for the disclosure that we’ve been deprived of for so long.

    Liked by 1 person

  5. presumably easier to spin off water( if not sold)
    likely stock split…more liquidity
    allows follow by analysts will lift demand
    inclusion in ETFs and Indices most likely…that certainly creates massive demand
    TRANSPARENCY
    would they report reserves??????
    all good for unit/shareholders

    mk in sewall’s point fl/ houston

    Liked by 3 people

  6. Annual election of all directors. First annual meeting scheduled one year from conversion date. Shareholders can amend the articles and bylaws and call a special meeting with low thresholds.

    Liked by 2 people

  7. TPL is a very unique business entity, with a unique charter and business objectives. Wouldn’t we lose some very important shareholder interests and benefits in changing to a C-corp? Can we consider retaining the trust entity but changing the charter to “fix” our business, and avoid some of the negatives in a C-corp transition? For example, can we remain a trust but change the trustee structure to a staggered shareholder election of 5 or 7 trustees, similar to a C-corp board structure without the C-corp. Can the parent entity be a Trust with sub-entities as C-corp’s.

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  8. Dear Trustees and Committee Members,

    My main frustration with TPL is that there is a total lack of communication. I have received one call back in my time as a shareholder, and that was in response to an email. It would really help to have a yearly shareholder letter outlining plans and thoughts, with some sort of state of the industry and region included. A reasonable assumption is that if you run a trust with 900k of land, offering drilling and water access to large, multinational companies, that you’d have some command of the sector.

    It’s been my impression that the trustees don’t have command of the business they are expected to run.. How would I know an expert from a fool if nothing is said?

    We wake up to TPL news and scratch our heads. Why was the land sold? Why was the land bought? Why are there so many employees, and what do they do? What are the divisions and who is in charge if we have a question? Can we have someone that answers emails and calls, and I mean all of them?

    We are desperate for information. Please share thoughts with us. If we knew how the trustees thought, we’d not be left debating the motives and economics on internet forums and in private email loops. This is what shareholders want when they say they want, “transparency,” Please stop expecting us to do an ungodly amount of research, likely requiring the hiring of charter planes so we can evaluate what’s happening on the land we own.

    Who buys back the shares. Who actually pushes the buy button, or sends the order? What motivates the purchases? Is it on a whim, or do rules and guidelines exist? May we see them, or can you develop that plan and publish it in some way so we know our money is being used wisely? We’d like to evaluate you as a capital allocators before we re-elect you.

    What is the rate of return on the water business? Can we see some examples of how that works? You aren’t really competing with the other 900k acre company next door, right?

    Let’s discuss incentives. We know that owning shares is a motivator. Buy some. I’m not here asking for everyone that works for TPL, or makes decisions for TPL, to put 25% of their net worth in the stock. I understand that some people are concentrated investors, and some are passive. That’s fine. But align yourself. Take a stand. Look at companies where the incentives are real motivators and the compensation is fair, and do that. Call Buffet, or anyone really, and ask them what they’d do in your shoes.

    When you don’t own many shares, but you’re in charge of my money, I really feel like I’m a sucker. You know more than I do, and yet I’m the optimist?

    Please have earnings calls 1-4 times a year. If you are buying a plane or a house for employees, show us that it makes economic sense. This proves your capital allocation skills. If you are saving us money, please do it. Actually, always do it. Be frugal and reasonable.

    I want you to get paid for doing good work. How can I evaluate that? Is it just share price, or is it focusing on IRR? Share price relates to psychology. IRR relates to capital allocation. Just because the stock has gone up like it has doesn’t mean you’re good at capital allocation. Show us the math and how you make decisions.

    I’d like to see some discussion from the heads of TPL about environmental impact. If I hired a property manager to manage my land and they were doing short-term focused stuff with it to make a quick buck, I’d be annoyed. I didn’t even pick you, so how do I know what you’re up to on my land? Act like a steward of my land, please. And yes, I’m aware that it’s a dirty industry and you’re renting out the land to do dirty work. Fine. We assume this risk. However, I don’t want to wake up to find out that TPL has allowed massive damage to lands that affect people next to TPL land. Please discuss your concerns and what protections exist in plain english. What is ok and what isn’t on our land?

    I’d like to be able to vote people in and out, but I’d also like policies kept fairly simple and clear so that a bad seed can’t mess things up for all of us. There need to be clear guidelines about stock options, elections, and how decisions about money will be made in the future.

    Just be honest, forthcoming, and communicate. We will like you a lot more.

    One last thing, and this goes out to the investor group and the trustees:

    I am personally pissed at all of you for changing the terms of the dispute. We voted on a trustee seat and you have decided to postpone all that in favor of this committee and other discussions. But we voted. Your settlement may shorten the battle and seek compromise, but you screwed us minority holders.

    To the trustees, you sued to screw us over on the validity of our vote.

    To the investors, we backed you and you settled against the terms of our support. I personally won’t support the trustees or the investor group until you show that you know how to make decisions, and share your reasoning.

    Finally, maybe the outcome will be favorable, but at this point, I really don’t think anyone is fighting for minority holders. Get your act together and stop wasting our cash and land on your stupid fights.

    Make money. Buy shares. Communicate. Get to work. Be a better human.

    Ezra Fowler
    Las Vegas, NV

    Liked by 3 people

    • Ezra: Another Las Vegas resident agrees with you. That would be me. (LV Blvd. & Starr area)

      The only difference I have with your position is that I still support the investors’ group since I’m an owner. They have to have had a reason to go this way, and I’m sure that the outcome will favor us in the long run. The committee needs at least one of the HK group’s 3 votes to do anything, so any 3 votes against also prevents anything untoward from happening. The lawsuits were withdrawn without prejudice, so they can be refiled if necessary.

      Liked by 1 person

  9. Agree with most of your well written sentiments Mr. Fowler. However, while the litigation brought many things to light to shareholders, the expense of having two of the nations top ten or twenty law firms going at it over everything was FAR too expensive to continue to be in the Trust’s interest. My main concern about the settlement was that it was dismissed without prejudice by both sides instead of with prejudice, meaning they could eventually refile over the same claims despite the extraordinary expense incurred so far. Good luck to management, and everyone invested in the Trust from this point forward. Please stay out of Court going forward.

    Liked by 1 person

  10. investors are also underestimating the monthly updates we are now going to start getting (!!!) .. we went from 1H and FY results; with extremely limited disclosure, to now have three of the largest shareholders sit down with the Trustees (as much as I hate them) to focus on possibly creating a C-Corp with monthly updates. I look forward to what September brings!!

    I added a sizeable amount Friday at $707 — this thing is just way to cheap

    Liked by 2 people

  11. A great idea that the two that still control the fiefdom could do today is to see the common sense of the argument and dismiss the lawsuit. It could pop TPL (oil prices down 21% since highs in April, TPL down 28%) and stop the bleeding that is taking place. It could also gain them some good will that they have lost in this stoopid battle.

    Liked by 1 person

  12. The IMPORTANT items for me are:

    1. For TPL to continuing buying back shares.
    2 .To pay very little or no dividends.
    3. To keep the staff small.
    4. Keep the salaries reasonable, not huge.
    5. Keep entity as a Trust if at all possible.
    6. Require annual meeting.
    7. Require a quarterly written report to stockholders.
    8. To turn water business into a sub corp. And sell business if it starts to loose money.
    9. To keep board at three or five people at max.
    Last, I have a large size interest in TPL so I hoping some of the items will be used.

    Liked by 1 person

  13. The asylum turned over to the inmates, You should have educated yourself before you bought in, The large shareholders are going to feast on us little guys. They may have already.

    Liked by 1 person

  14. I recon a stock split would cheer me up since they have worked for me over the years and I understand the arithmatic . Would be a fine idea to prevent disalution in a new corp. Management and Trustees need to be obligated to buy shares. I hope to ride this pony for many years !

    Liked by 1 person

  15. the table is set. We ain’t members of the club, Except for the trustees we are not represented and the big shareholders seem to have captured the little people vote. Look who has been buying shares and consider whose interest is increased when shares are bought by the trust.

    Liked by 1 person

    • fair enough. but you might want to check finviz.com tpl (bottom of the page) to see how your interests compare to a major shareholder!!

      Liked by 1 person

      • Rex,

        There is a nuance I am not understanding from your post, and a different perspective that could be insightful. I’d appreciate having more details on your opinion if you wanted to share.

        Here is my view:
        HK is buying a small amount of shares everyday and the current buy rate would add 12,000 shares in a year. Since they already own 25% of all shares, the additional shares being bought daily are insignificant, even after a year.

        HK has been an owner for 25 plus years. They have an owner mentality. I believe they started the proxy fight because there was too much of a business model change seen in the last two years. (Examples: new water business, buying/selling both royalties and land, no oversight on pay practices, limited information disclosed, etc). The Trustees for life have shown many times they do not have the shareholders’ back. Or even meaningful share ownership.

        If HK is buying more shares (and I have been also), aren’t we really in alignment? I for once feel I am at the grownups table and not left in the dark by the Trustees.

        Liked by 3 people

      • Rex,

        When the trustees buy stock, they concentrate ownership of the existing shareholders. They stopped because their opposition is being concentrated. That’s why we all get the feeling that the trustees are against shareholders.

        What’s the other side of this?

        Liked by 2 people

        • Ezra is correct again. Every share that the Trust buys back reduces the number of shares outstanding, and the math then says that the percentage owned by every shareholder, no matter how small, goes up, In HK’s & other’s case, they could soon be over 30% ownership if the Trust buys shares.

          Liked by 1 person

  16. Well said. There is nothing that HK can do that doesn’t benefit me and the other shareholders. All you have to do is look at the amount of money this means to them to realize that they will never jeopardize their investment. My broker and I always use ‘follow the money’ when we trade, and HK has the money that we’re following in TPL.

    Liked by 1 person

  17. Ok guys the dominant shareholder (as I understand) has stated that he and his associates want to be the ultimate shareholder. His action seems to have stalled the increase in price. His group is accumulating shares at this lowered price and is getting cheers from the crowd. The trustees have stopped buying because they see that their acquisition increases the power of the “dissidents” . That may be fine by you….. but when they come for your shares to finish their plan then I will look back at their history in this fight. They have not been thinking of you.

    Liked by 1 person

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