On October 29, 2021, Texas Pacific Land Corporation (the “Company”) issued a press release announcing that the Board of Directors of the Company (the “Board”) has determined to postpone the 2021 Annual Meeting of Stockholders (“the 2021 Annual Meeting”) from November 16, 2021 to December 29, 2021. The Board has also fixed the close of business on November 29, 2021 as the new record date for the determination of stockholders entitled to notice of and to vote at the 2021 Annual Meeting or any adjournments thereof.

The Board decided to postpone the 2021 Annual Meeting in order to provide the Company with additional time to review and respond to stockholder proposals that have been received by the Company.

The Company filed a definitive proxy statement with the Securities and Exchange Commission (the “SEC”) on October 4, 2021 and an Amendment No. 1 to the definitive proxy statement with the SEC on October 22, 2021. The Company will be filing a second amendment to the definitive proxy statement with the SEC, which will contain information regarding the postponement.

Get off that ski lift and get yourself to Dallas.

Shrouded in Mystery

What do we know about TPL’s long term corporate strategy and capital allocation/return plans?

We’ve heard, via a research report, that management would like a stock authorization to do M&A. We’ve also seen the company hire individuals with M&A experience. What’s the direction there?

There are no shareholder proposals that pertain to acquisition strategy or capital allocation. Why not?

Do investors need better/more representation on the board?

With the three investor representatives bound by a stockholders agreement, are investors marginalized by a simple majority board vote?

Why are we still in the dark?

CS Writes Again

TPL management views an eventual share authorization as a key piece of the puzzle to position TPL as a consolidator long term. We believe management views the steps the company has taken over the past several years as setting it up to be an eventual consolidator (e.g. C-Corp conversion, new Board of Directors, enhanced operational disclosure, new accounting firm, recent hires, etc.). And that adding a share authorization is a key piece to their long-term outlook for the company. Since we initiated coverage, it has become increasingly clear that this is in direct contrast with a group of vocal long-term retail shareholders who want to see the company return to its roots (TPL was originally a liquidating trust) with a focus on continued share buyback, maximizing margins/capital efficiency, and an aversion to large-scale M&A activity. Our view is that as management fully articulates its strategic outlook, it will likely drive an accelerated shift in the investor base toward an institutional audience.

If share authorization for M&A is so important to management, why isn’t it on the proxy this year? Is it possible that the board and management aren’t aligned on this? And why does CS keep beating this drum? Who is feeding this line of thinking to CS?

2021 Proxy Statement

One accounting firm, three board members, and four (4) comp proposals.

The proposals in the prior post didn’t make the cut. I suspect HQ will be up to their eyeballs in proposals next summer.

“The maximum aggregate number of shares of common stock that may be issued under the 2021 Plan is 75,000 shares, all of which can be issued pursuant to the exercise of incentive stock options.”

SEC is “Unable to Concur”

The link above will take you to a list of “shareholder proposal no action responses” from the SEC.  The SEC issues these responses after a company has contacted the Commission with a request to validate their reasoning for excluding a shareholder proposal in its proximity materials.

TPL management appears to have contacted the SEC in regards to two seperate proposals

Proposal of Robert J. Zaccheo, Jr 

Proposal of Special Opportunities Fund, Inc 

In both instances, TPL management claims that the proposals were received late and aren’t eligible for inclusion.  In both instances, the SEC states that it is “unable to concur” that the grounds claimed for exclusion are legitimate.

Only a court can truly decide whether the exclusion of a proposal is legitimate so be sure scout the materials to see if the proposals above made the cut.

At the very least, this is a sneak peak into the things that shareholders care about, namely a contination of TPL’s historic legacy of share repurchases and high profit margins.