Credit Suisse Initiates Coverage On Texas Pacific Land with Underperform Rating, Announces Price Target of $800
TPL’s first annual shareholder meeting is scheduled for November 16th, which means the proxy statement should be out by October 7th at the latest. We expect all three of its Class I directors (Barbara Duganier, Dana McGinnis, and CEO Tyler Glover) who officially joined the board in January to be nominated for reelection, and while we were hopeful to see a share authorization proposal, we believe that is more likely a 2022 event. That said, we believe a share authorization would be a meaningful potential positive that would enable the company to include stock-based compensation as part of its long-term incentive plan (LTIP) for management. In addition to greater transparency around the process, we believe including stock-based comp to its LTIP would help address concerns around greater incentive alignment between management and shareholders. In Figures 12-13, we provide a comparison of management plus board ownership to the rest of our royalty coverage universe. Notably, without a share authorization, TPL is also unable to use equity to help finance a large-scale acquisition.
Two things are apparent:
1) CS is attempting to frame TPL as a yieldco though it has never traded as such. That said, it might be good for management to think about the signal they are sending with the dividend. Appears as if high div = low multiple.
2) The pressure to turn this thing into a management/Wall Street enrichment vehicle (see above) will continue.
If you turn it into a shitco, it will trade like a shitco.
The Texas Pacific Land Trust Investor 