Happy Thanksgiving!
Lawrence Goldstein of Santa Monica Partners LP wrote a letter to the board and asked me to share it. I couldn’t agree more with the contents of the letter. As ISS has communicated, it is time to get to work on enacting the will of the shareholders.
Solid start for the new Chair!
https://ir.stockpr.com/tpltrust/sec-filings-email/content/0001104659-23-117340/tm2330560d1_8k.htm
Written consent (again) and special meeting propositions both get the majority vote! Make sure you communicate your desire for corresponding action to the company.
One year terms…..
Thoughts from a friend of the blog:
1. Chair Barry gave an opening speach – proud of company and employees.
2. Murray gave a magnanimous talk. Said tpl is the best enterprise in the country if not the world.
3. Shareholder questions.
– was the vote to sue shareholders unanimous, aside from eric and murray. Yes.
– if the company loses lawsuit, will supporting board members resign. Barry said it’s up to them.
– will company reimburse shareholders for out of compact expenses connected to the lawsuit. Company tried to make requests as painless as possible per Dobbs.
– will board ratify shareholders proposals that pass? If yes, when? Board will meet to decide.
– why did company hire private investigators to investigate shareholders? After first denying it happened, company admitted to their lawyers hiring a firm for
‘Due diligence’ purposes.
– after the alleged fraudulent proxy incident regarding Sidley, board asked why Sidley wasn’t fired. Company denied there was a fraudulent proxy. We can all read the trial transcripts for ourselves.
– company asked who were the top shareholders they discussed management comp plans with. The room was asked to raise hands if management discussed comp plans with them – no hands raised.
– room was asked to raise hands if you supported no large M&A and using cash for share repurchases. Majority by far raised hands.
– management was asked why so much cash on balance sheet. Tyler said for m&a options.
-one shareholder commented his desire for tpl to have a Berkshire type annual meeting.
My thoughts on way forward:
Management and the board (aside from Eric and Murray) lost the faith of shareholders. Retirement of co-chairs was a start to repair damage, but not sufficient. Steps to regain credibility.
Suspend all asset sales.
Suspend all large M&A.
Start buying back shares in size.
Investigate previous allegations of wrong doing by co-chairs. If they are innocent, then issue is put to rest. If allegations proven true, then seek legal remedies.
Investigate alleged issues with the McGinnis and Glass Lewis proxy representations that were allegedly written by Sidley. If allegations have merit, seek remedies.
Immediately ratify all shareholder proposals that passed.
Allow shareholders to ask questions on earnings calls.
Information and Observations (from others):
-With the close of this meeting David Barry and John Norris are no longer on the board
-The stockholders agreement between the company and HK/SoftVest is terminated. HK/SV can vote however they want going forward
-Various board members were mingling with investors at casual events prior to the meeting
-Q&A at the meeting was quite spirited
-We learned that the board unanimously voted to sue HK/SV for their break from the board on prop 4. The legal spend is on ALL of them
-Shareholders in attendance indicated a strong preference for buybacks as opposed to M&A when informally polled during Gabi Gliksberg’s time at the microphone
If you were there, what did I miss?
I’m not in Dallas. Keep us updated on the fun!
https://x.com/310value/status/1722951166256914606?s=46&t=oboeinihvjNn__bpHMCoXQ
Local carpetbagger tries to make good.
This alert updates the analysis published Oct. 27, 2023 with respect to the vote recommendation on director Murray Stahl (Item 1b). In the original analysis, a vote against Stahl – the only incumbent director on the ballot this year – was recommended due to the board’s failure to take action on a shareholder proposal which received majority support at the 2022 annual meeting. Upon further review, given that Stahl is a designated director of Horizon Kinetics pursuant to a shareholders’ agreement (which, among other things, requires Horizon Kinetics to vote “in accordance with the recommendation of the majority of the Board in respect of any stockholder proposal submitted pursuant to Rule 14a-8”), and that various improvements in governance have come about since the initial contested director election in 2019, and given that the company has not stated that the board’s opposition to the 2022 shareholder proposal (or to the similar proposal on this year’s ballot) was unanimous, we are not able to conclude with confidence that Stahl is accountable for the company’s failure to implement the majority-supported proposal. Accordingly, notwithstanding the board’s failure to take action on the shareholder proposal, support for Stahl’s election is considered warranted. All other vote recommendations remain unchanged.
ISS recently issued its voting recommendations (have you voted yet?) for the upcoming meeting. While I can’t share the report I can offer two highlights.
1) ISS recommends voting AGAINST all incumbent candidates. Shareholders voted in a right to act by written consent proposal last year and the board ignored it. I’m guessing they won’t ignore it next year.
“The board failed to disclose any meaningful engagements with shareholders or implementation of the majority-supported shareholder proposal providing shareholders with the right to act by written consent at the prior annual meeting.
2) ISS recommends voting FOR proposals 4 (right to call a special meeting), 6 (executive share retention), and 7 (right to act by written consent (again)).
All in, this is a win for shareholders. We are harder to ignore. Full rolling one year terms soon. Can you feel the tension in the air? I know I can.
Post below will be amended. I was doing more digging on cash and realized I was dead wrong. $8MM interest on cash in a quarter sounds nice. Though the cash shouldn’t be there, but that’s a different story.
Other income, net. Other income, net was $8.0 million and $1.9 million for the three months ended September 30, 2023 and 2022, respectively. The increase in other income, net is primarily related to increased interest income earned on our cash balances for the three months ended September 30, 2023 compared to the same period of 2022. Higher cash balances and interest yields during this period contributed to the increase in interest income.
Other income, net. Other income, net was $20.2 million and $2.6 million for the nine months ended September 30, 2023 and 2022, respectively. The increase in other income, net is primarily related to increased interest income earned on our cash balances during 2023. Higher cash balances and interest yields during this period contributed to the increase in interest income.
$790MM in current assets on the balance sheet. A new high.
As an aside — I wonder what the real return has been on the cash position since it started to build? Cumulative inflation is probably 20%+ since the drama started and buybacks effectively stopped. Not efficient.
I can only interpret the lack of material buybacks as an ongoing FU to shareholders.
The intangible assets line on the balance sheet is new.
Some relief on legal expenses (finally).
Land sales of $5.4MM of royalty interest acquisitions of $1.8MM
Last Quarter – For the six months ended June 30, 2023, we sold 43 acres of land in Texas for an aggregate sales price of $1.4 million. There were no significant land sales for the six months ended June 30, 2022.
This Quarter – For the nine months ended September 30, 2023, we sold 18,061 acres of land in Texas for an aggregate sales price of $6.8 million. For the nine months ended September 30, 2022, we sold 129 acres of land in Texas for an aggregate sales price of $3.3 million. There was no carrying value in the land associated with these sales.
Last Quarter – For the six months ended June 30, 2023, we acquired oil and gas royalty interests in 61 net royalty acres (normalized to 1/8th) for an aggregate purchase price of approximately $1.8 million. For the six months ended June 30, 2022, we acquired oil and gas royalty interests in 92 net royalty acres (normalized to 1/8th) for an aggregate purchase price of approximately $1.7 million.
This quarter – For the nine months ended September 30, 2023, we acquired oil and gas royalty interests in 119 net royalty acres (normalized to 1/8th) for an aggregate purchase price of approximately $3.6 million. For the nine months ended September 30, 2022, we acquired oil and gas royalty interests in 92 net royalty acres (normalized to 1/8th) for an aggregate purchase price of approximately $1.7 million.
How much of total water expenses should we ascribe to water royalties?
Produced water royalties. Produced water royalties are royalties received from the transfer or disposal of produced water on our land. Produced water royalties are contractual and not paid as a matter of right. We do not operate any salt water disposal wells. Produced water royalties were $61.8 million for the nine months ended September 30, 2023 compared to $52.7 million compared to the same period in 2022. This increase is principally due to increased produced water volumes for the nine months ended September 30, 2023 compared to the same period of 2022.
Net income. Net income for the Water Services and Operations segment was $74.7 million for the nine months ended September 30, 2023 compared to $61.2 million for the same period in 2022. Segment operating income increased $17.1 million for the nine months ended September 30, 2023 compared to the same period of 2022. The increase is principally due to the $28.9 million increase in segment revenues and was partially offset by the $11.5 million increase in water service-related expenses and the $3.8 million increase in income tax expense. Expenses are discussed further above under “Results of Operations — Consolidated.”
What did you see?
The Texas Pacific Land Trust Investor 