They Knew All Along (HK/SV Respond in Delaware)

tpltblogger14 Comments

https://tinyurl.com/5b7wcyzf

More evidence of fine governance from the team. How does the rest of the board (Cook, Epps, Duganier, Best, Kurz) just watch this all happen? Aren’t they embarrassed?

Defendants first informed TPL in August 2022 that Defendants would vote against Proposal Four, and reiterated their position repeatedly in the following months. Nonetheless, TPL waited to file proxy solicitation material identifying Defendants’ position until the day before the stockholder meeting.

Against this historical backdrop, it is inconceivable that Horizon would have signed an agreement requiring it to vote in favor of the authorization of millions of new, dilutive shares. Moreover, the plain text of the Stockholders’ Agreement shows Defendants expressly reserved the right to vote against any such corporate maneuvering. Hoping the issue would become moot if enough stockholders voted for Proposal Four, TPL took a “wait and see” approach to see how the vote turned out. When Proposal Four failed at TPL’s November 16, 2022 annual meeting, TPL adjourned the meeting to February 14, 2023, and filed this action six days later. TPL simultaneously moved for expedited proceedings, requesting a trial on February 3, 2023, less than ten weeks from now.

This is not the first time TPL has sued Defendants when it did not like the outcome of an election. TPL and Defendants were adversaries in a 2019 proxy contest, which led to TPL purporting to invalidate a trustee election and filing a lawsuit on the eve of a stockholder meeting to prevent one of SoftVest’s principals from becoming a TPL trustee. Regrettably, Defendants expect that discovery will show that this lawsuit is part and parcel of TPL’s historical use of stockholder assets to suffocate basic stockholder voting rights. In particular, Defendants anticipate that the proposed authorization of new shares may be part of a plan to issue shares to individuals who are supportive of TPL’s incumbent management and legacy directors. Without this share issuance, those individuals are at a risk of being replaced.

When the votes from TPL’s November 16 annual meeting were tallied, Proposal Four failed. TPL adjourned the meeting with respect to Proposal Four until February 14, 2023. On November 22, 2022—nearly twelve weeks after first learning that Defendants would vote against Proposal Four—TPL initiated this action and requested expedition.

14 thoughts on “They Knew All Along (HK/SV Respond in Delaware)”

  1. TPL should not pay their attorneys for the rotten advice they are getting. MS’s & EO’s lawyers decimated TPL in their response, but I don’t I don’t know why a motion for summary judgment wasn’t included. Their is enough case law presented to support such a motion, along with the black and white wording of the shareholders’ agreement.

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  2. There are no words strong enough to criticize the actions and manipulation of Barry/Norris/Glover (Axis of Evil) and stiffs Cook/Duganier/Epps (Puppets and Dead Weight). I’ll give Best and Kurz a pass for now since they are newbies to the Board, and were praised by Stahl and Oliver when they were announced. My guess is that the balance of power split on the Board is 6/4, but the 6 were enough for a majority to cook up Proposal 4 and try to slip it by uneducated shareholders and proxy advisory services as a “Board Recommendation.” Totally shameful.

    Stahl and Oliver’s rebuttal makes all the right points and will clearly prevail. Every single dollar the company puts towards legal fees is a complete waste of our assets. Perhaps they are asking for the April extension to embarrass the plaintiffs further and effectively end any ambiguity and relevance of the dreaded Stockholder’s Agreement.

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  3. Some observations and comments about reading the response of HK and Softvest to the TPL suit for nonperformance on voting for Proposal #4.

    The response is from Vinson and Elkins, a large multinational law firm. Representation on Delaware law is from a Delaware firm Young Conaway Stargatt and Taylor.

    The response is narrow, aimed at only the original lawsuit, with no attempt to bring in new claims or other parties. The legal cleverness of this approach (although there are more smoking guns than at a Texas shooting range with this management and board of directors) is to keep the focus on Proposal #4 being anything but routine. It appears HK/Softvest are very comfortable with their legal position.

    Since the focus is narrow, its an interesting approach of TPL management to push for a February 2023 trial. One could interpret that as legal bluster, a rush to judgement to make it look like their case is strong as a negotiating ploy.

    The response does a masterful job of casting significant doubt on the merits of the TPL lawsuit. Specifically:

    1. Case law showing its “not routine”.
    2. Lack of details on how TPL would be harmed if #4 doesn’t pass in spite of the purported urgency.
    3. Duplicity of TPL management to “game” this issue to see if it passed since they knew since August HK/Horizon would not support.
    4. Nice jab to say management has done this before, when they knew they were going to lose an election they file suit.
    5. Long history of HK and the business model of TPL makes it inconceivable they would ever see this as routine. As such, its really an effort to dilute HK ownership and prevent the original trustees from being voted off the board.

    Below is an interesting statement from the response from HK/Softvest:

    “Defendants anticipate that the development of the full factual record surrounding the relevant issues will require document and deposition discovery into the parties’ negotiations of the Stockholders’ Agreement, the meaning of the voting restrictions, and TPL’s purported need for additional authorized shares.”

    Given the squishy ethics seen via the Gliksberg case, pushing for discovery in these areas could find even more facts to support the HK/Softvest position.

    The ask of HK/Softvest of time with a trial date in April 2023 seems reasonable.

    Next up will be the court response on the jostling regarding trial dates. My bet is the April 2023 date will prevail. Courts don’t like to constrain reasonable time requests from defendants and specific reasons were given on what they additionally need to defend their no vote on Proposal #4.

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  4. These clowns are trying their last attempt to get things their way as clearly in the next vote they will get their sorry ass voted out, every dollar spent in legal fees could have been used to repurchase shares…. Absolute shameful clowns and I hope they will never get any decent corporate career after being booted

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  5. The fact that this bs has gone on for 3+ years just goes to show they are hiding much more than just a no vote for proposal 4. Open the books! Dobbs is afraid of being barred, Barry and glover are afraid of jail, Cook, Steddum who knows.

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  6. Just re-read the answer on this case, and was searching the Delaware Court to see if there were any new filings. Noticed something I had overlooked. Case numbers are assigned in the following format, year, consecutive number, and assigned judge initials. In this case its 2022-1066-JTL.

    JTL is J. Travis Laster. A familiar name, he was the presiding judge in the Gliksberg case. I think this is excellent, since he will be very familiar already with the avoid, deny and obfuscate strategy of TPL management seen in that trial transcript. He seems to be a “no nonsense” kind of judge based on his findings in that case.

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    • Apparently this judge has a strong bent toward the moralist judicial philosophy. Bottom Line: TPL Management is using TPL Shareholders’ money to fight the wishes of the majority of Shareholders; likely because they know they are soon to be replaced… if not sued and/or indicted*. (*seem like a stretch but would not be surprised to find a some – cough – related party transactions hidden in the books.)

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  8. It would be interesting for someone with a better knowledge of Gliksberg’s and the current case to email or call IR or the directors to get their opinion (actually spin) on this revelation.

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  9. Officious intermeddler here…I was looking into investing in some TPL shares, got mesmerized by all the legal proceedings and then took the time to read a few of the related documents. From my position as a CA lawyer with 46+ years experience, given what I have read here (admittedly a small percentage of the totality of the proceedings), it seems to me that: 1) You should win the motion to set the trial date later, rather than earlier and 2) There is no way in hell you lose to the Board on the Proposal #4 issue. This Board has hired expensive lawyers to fight an issue they cannot win, so there will be the usual tactics of DD&P (delay, deny and prevaricate), resulting in nothing other than an enormous waste of company assets. In fact, their impaired judgment here may give rise to additional litigation versus the Board for their seemingly reckless misuse of your aforementioned valuable company assets. Wish you the best, rewalkeresq@yahoo.com
    P.S. Any advice on investing now vs. waiting??? All insights appreciated.

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    • mrultralogic- thanks for the insights. Hope you are right in your assessment.

      On your question, there is a real possibility of recession in 2023. I think that oil prices may suffer a bit in that scenario and that could mean lower prices for TPL in the short run. TPL also likely benefitted this year from the rise in oil pries resulting in YoY growth rates that attracted some momentum investors (where else could the IBD crowd go?). IF they go somewhere else, who knows. Peace between Ukraine and Russia could spur selling…yada yada yada.

      OTOH, if recession brings about another round of QE all assets may rise, and just the thoughts of slowing rate increases from the FED seems to be spurring risk taking. TPL seems to be a bit of risk on equity. And, if we get inflation again late next year, oil royalty is a good place to be. I tend to believe that the current disinflation cycle we are in will end and above trend inflation will be with us for the foreseeable future…..SPR release gotta end some day and China will reopen its economy one day as well…yada yada yada.

      so my guess is we see lower prices (lower than the 2600-2700) for TPL in the next 6 months, just on how pricey TPL currently is. I still like energy for the next decade, but i am not a buyer at 2700. (full disclosure: I never anticipated TPL getting to 3K either….so buyer of my shit beware).

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