HK and SV – NO ON #4!

https://ir.stockpr.com/tpltrust/sec-filings-email/content/0001104659-22-118989/tm2230559d1_defa14a.htm

On November 15, 2022, Texas Pacific Land Corporation (the “Company” or “TPL”) announced that it was informed that Horizon Kinetics LLC, Horizon Kinetics Asset Management LLC, SoftVest Advisors LLC, and SoftVest, L.P. (collectively, the “Investor Group”) have submitted proxies to vote against Proposal 4, which is the proposal to approve an amendment to the Company’s Certificate of Incorporation increasing the amount of authorized shares of TPL common stock (the “Share Authorization Proposal”), at the Company’s upcoming 2022 annual meeting and that they do not intend to change their vote. The Company believes that the Investor Group is required to vote for the Share Authorization Proposal pursuant to the voting commitments in their stockholders’ agreement with the Company. The Company reserves all rights and remedies, and waives none, under such stockholders’ agreement.

Looks like Stahl and Oliver don’t want to be cut in half either.

Highlights above and below are mine. I wonder if 1) the company was legally bound to share that announcement as material information and 2) how long they sat on it?

I’m not a lawyer but, to me, #4 looks like an ‘extraordinary transaction’ as defined by the 6/11/20 Stockholders’ Agreement.

(b) Notwithstanding Section 2(a), the Stockholders shall not be required to vote in accordance with the Board Recommendation for any proposals (i) related to an Extraordinary Transaction or (ii) related to governance, environmental or social matters; provided, however, that the Stockholders shall be required to vote in accordance with the Board Recommendation for any proposal relating to any corporate governance terms that would have the effect of changing any of the corporate governance terms set forth in the plan of conversion recommended by the Conversion Exploration Committee of the Trust on January 21, 2020.

(v) the term “Extraordinary Transaction” means any tender offer, exchange offer, share exchange, merger, consolidation, acquisition, business combination, sale, recapitalization, restructuring, or other matters involving a corporate transaction that require a stockholder vote;

17 thoughts on “HK and SV – NO ON #4!

  1. Love true investors that really fight for proper governance. The current clowns should be punished and kicked out of the board considering they have been doing nothing but trying to scam investor money recently… seriously, it’s not rocket science to just collect the damn royalty cheque and buy back shares or pay it out as dividends, a model that has worked for decades…

    Liked by 1 person

  2. This sets up for what should be a fascinating annual meeting tomorrow! I’m jealous of anyone who can attend in person. Please share any observations.

    My guess (not a legal opinion) is that the Board will postpone announcement of the Proposal 4 outcome and will threaten action against HK and SV for violating the Shareholder Agreement. However, I think any reasonable person would see that the “Extraordinary Transaction” clause as justification for their votes… unless the “corporate transaction that require a shareholder vote” is what Barry/Norris try to hang their hat on. Technically, they could try to argue that the proposal is to only authorize additional shares, and that shareholder vote would not be occurring if the issued amount of shares is under the 20% threshold where the NYSE requires shareholder approval.

    No matter the outcome, we are fortunate to have large shareholders validate that this is a bad idea because we have no trust in management to make attractive acquisitions. It also is further evidence of how far the deplorables will go to try to circumvent shareholder interests.

    Liked by 1 person

  3. Thanks to HK, Softvest, and Gliksberg for clearly being on the side of shareholders (owners), and not management. TPL management by advancing #4 has demonstrated they have different objectives than the shareholders who are long run investors. Management owns few to no shares and wants to be paid today. The agency problem is clearly on display.

    There is a divided board of directors. I can’t see it being a unanimous decision to have put #4 to a shareholder vote.

    Its interesting TPL management makes a big deal in the announcement about HK / Softvest being required to vote for proposal #4, and keeping their legal options open. That could just be posturing, or the start of a legal tussle to determine if #4 is really “routine” business or something else.

    What would really put TPL management in a bind is if proposal #8 gets a majority of the vote now that it has the approval of Glass Lewis. Then they would be an a really bad optics position, the shareholders (owners) championing fairness, and no dilution, while management tries to say the majority owner has to vote the way they want. Its not a good look.

    Its curious timing on how the announcement came out today, suggesting management just didn’t know if HK / Softvest would support #4. Given they didn’t know, it now makes a lot more sense on why they put out the press release urging a yes vote on #4. This suggests they were already in trouble with the vote (as they can see all the interm votes daily), even before knowing the HK / Softvest decision.

    Remember the board pushed hard last year to not un-stagger the board director terms, and even with HK support lost the election, showing there was huge support for the proposal. It now could be a landslide against #4.

    Liked by 1 person

  4. thank you! I hate the idea of divesting from such a beautiful real asset! We just need Eric Oliver as the one running the show. Yeah. too much to hope for. but one can dream.

    Liked by 1 person

    • There isn’t one.

      Just part of the “shareholder friendly” agenda of being transparent and easy to communicate with. Oh wait, am thinking of the 99% of S&P companies that would have remote capabilities to attend the annual meeting.

      Liked by 1 person

      • Well after last year’a “technology fiasco” I guess they decided to just do away with the problem (“shareholders”) vs fixing the problem. Well hopefully whoever attends can give the group a full report after

        Liked by 1 person

  5. They adjourned the meeting portion concerning item #4 until they work out the situation with the other 2 directors voting against it. Drama continues.

    Like

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