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?