1.1 Billion Reasons to Reflect

tpltblogger18 Comments

$1.1B in TPL market cap was lost with TPL’s 7,674,867 shares experiencing a $149.12 loss in today’s trading. The stock was down 8.5%.

The market today was no picnic, but in context, TPL’s performance was ugly: SPX -0.6%, XLE -0.5%, WTI -1%, BSM -2.5%, VNOM +0.2%

I interpret this move to be a mandate from the market for cooler heads to prevail. With appeals possible and the looming responsibility of the board to take action on 2023 proposals 4 and 7 (special meeting and written consent), there is an opportunity for the board to come together and compromise for the benefit of shareholders. There is leverage on both sides here.

The “currency” to do deals will get only get weaker if common sense does not emerge while the cash on the balance sheet will continue to earn less than the historical IRR of the company. Shitty all around. Let’s figure it out.

18 thoughts on “1.1 Billion Reasons to Reflect”

  1. Never seem=n a management with such a death wish. They seemed to think this is not real. Market says otherwise.

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    • doesn’t this help management – by lowering the valuation of TPL it makes it easier to do a dilutive deal. The goal isn’t shareholder value, the goal is liberation from significant shareholders.

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  2. One of my tenets is to invest only with managements and boards who are honest, ethical and aboveboard. This crew has been nothing like that (ex-MS and EO, at any rate). Their past actions have been shifty and duplicitous, clearly intended to throw up smoke and hide their intentions from shareholders. They’re bored of running a liquidating entity and want action, and will apparently go to great lengths to get it.

    Do we really want to be part of this? I trust MS and EO, but do they, and other shareholders as a group, have the ability to impose the will of owners on our agents, who are otherwise ignoring our wishes? I would hope so, but I fear not.

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  3. Why would anyone stay in right now unless your long term? The court’s opinion was the investment could/would be diluted 50%. An overpaid board with little hands-on function sitting around how to get richer wanting to cut a water business finally doing well? Too much thinking involved on that I guess. This is not Texas grit. I think it may work out but it’s going to take some heartburn to get there.

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    • Why would anyone be in TPL unless long term? If you want to make a short term bet on commodities there are far more efficient ways to do that.

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      • Barrel

        What other good short term bets are there in commodities? I’m a beginning investor and just started investing in TPL since July when I bought it under $1295 a share, and also started investing in Horizon Kinetics.

        I was able to convince my company to add Horizon Kinetics KSCOX fund to our 401k plan which should be starting late this month or early next month. The largest KSCOX holding in TPL almost 50%.

        After the stock split I’m wondering if I should keep purchasing TPL on major dips or just hold what I have and look for higher returns elsewhere.

        FNV is near one year lows.

        Any recommendations by anyone for a substitute for TPL. It looks like it has done quite well for a number of years wish I heard about it earlier.

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        • HK has had a few good quarterly updates talking about this – you can’t replicate TPL’s assets, but if you are looking for a similar investment thesis of land ownership, and o&g royalties supported by a dividend and buybacks, PrarieSky Royalty is the best comparison. I have been building a position in that for a bit and their management is fantastic – it’s so refreshing.

          PBT and Sitio are other alternatives focused on the Permian, but not quite the same strategy.

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  4. Would it be too annoying for TPL to anticipate what market news may trigger a selloff, especially among institutional investors? Never act proactively because I guess they don’t give a damn about stock price anyway. For example, writing a real press release about the virtues of a 3-1 split (whether we believe that or not). Normally “splits” are received well by investors, but not for TPL with all the other gunk in the lawsuit decision that is spooking many investors, apparently.

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    • Note to Board:

      1) buy back a lot of stock asap.
      2) settle with hk/sv.
      3) ratify the shareholder proposals
      Asap.
      4) implement a formal return of capital plan.

      Doing the above would go a long way in earning the forgiveness of shareholders and likely gaining some goodwill.

      Not doing the above would create a longer fight that would end with the board being flipped and endanger the board members’ likelihoods of serving on other public company boards.

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  5. Market cap dropped another 4.5% today on the court ruling. The Barry MA dilution plan is officially a disaster.

    It could only have worked (and only to his and his cronies’ benefit) by keeping it below radar, i.e., pretending it was just for stock split housekeeping purposes. That lie got exposed in court. The plan was sold under false pretenses, and the potential acquisitions were conducted in secret by the sad SAC (mercifully none were concluded). With the shift to C-corp, there’s clearly no place for this kind of leave-it-to-us good ‘ole boy dealmaking, and one would like to think the new board members agree.

    Not least because if the board persists with the 3:1 split, thereby keeping open the possibility of 50% dilution, it will further tank the stock and effectively wipe out the spending power of any new shares anyway. Nobody is asking for acquisitions. Not least if the idea can’t be explained and sold first to shareholders. Plus 3:1 doesn’t really change the trading volume enough for uplisting. Like I said on X, best thing the new look board can do now to re-establish rapport and trust with the shareholders is to abandon the suicidal dilution proposal and announce a straight 20:1 split instead with some new buybacks.

    TPL is a unique company with a unique asset. It wasn’t broke. It didn’t need fixing. Just proper handling. Which to be fair, the company was doing otherwise in plenty of areas, such as growing the water business, improving the investment decks, canny easement deals, doing a few low-cost strategic alliances with crypto miners, etc.

    Onwards to better times.

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  6. You have to remember the intuitional investors are playing with a different set of rules and they own 60.8% of the float and the shorts are looking for the price to go down so they can cover their bets. The short interest is down from a high of 4.37% in mid July that was a year high of 334,583 shares short on July 14th which has declined to 3.5% which is 268,208 shares short on October 13th. That turned around after the Annual meeting and increased to 271,848 or 3.55% on November 15th [after the Annual meeting]. This is all reported on the FINRA website every two weeks. The next update for the end of November will be available on December 11th.

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  7. There is information not shared with us IMO. The sudden agreement between HK/Sv and the plaintiffs that saw B&N not seek election, terminated the shareholder agreement, new agreement not to publicly criticize etc, with MS and EO ending their threat to resign. Something likely got worked out regarding prop 4 and our two new board members were part of it. Just wish I was treated as an equal owner and knew what that deal was. I hate being little.

    Whatever the deal is, Cook still must go. Too many Cooks spoil the C corp.

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  8. I hope the board and management is looking at the stock this week and realizing the only possible message is “you are complete idiots”

    It takes a special level of stupid to ruin such an unequivocally fantastic asset.

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    • I hope they look at it and realize that the aversion to them doing large deals is a view broadly held by the shareholders and not just that of a handful of them who go to the annual meeting.

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  9. Is there a way to put together a shareholder letter to the board stating widely held views from participants in this blog where we can sign our names?

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    • I don’t think they care. If they cared they would have some rudimentary amount of investor relations. They have none. The only shareholders they seem to interact with are the two hedge funds that own more than half the company, and who they sued.

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  10. The split is good for the market but feel sure one would be interested in how they would handle the issuance of “new” shares without the market value paid to present stockholders? Anything else would be theft. I really don’t understand why they cannot buy the shares on the open market back for their kitty. Not versed on SEC regulations. Do not get rid of the water business either. The company does nothing else actively except make bank deposits and keep track of accounts receivable. I think selling water without the plastic bottle was a great idea.

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