Back in Delaware

tpltblogger8 Comments

https://courts.delaware.gov/Forms/Download.aspx?id=226278

https://courts.delaware.gov/calendars/list.aspx?ag=Supreme%20Court&sec=Calendars

The billable hours continue as the Empire and the Resistance are set to meet again in Delaware on February 21.

An astute reader writes:

“The Delaware Supreme Court hears cases every Wednesday. As is typical by Supreme Courts in most states, briefs have been filed before the case is heard. Appeals cannot bring up anything outside of the original lawsuit except in unusual situations with outcome deterministic consequences such as if a document with decision changing implications has been found after the original trial.

The Supreme Court of Delaware also releases decisions on cases every Wednesday. By tracking this site we should be able to have visibility into when a decision will be released.”

I will post the briefs for this session should they happen to cross my path.

Governance Watch!

tpltblogger1 Comment

Here we stand, three months (less five days) since the last shareholder meeting. Nine months remain until the next meeting. 

At the last meeting, proposals for stockholder rights to call a special meeting AND stockholder ability to act by written consent were both passed by a majority of votes. Boards don’t typically act quickly but I sense the clock is ticking on these proposals.

Ignoring the proposals, as is TPL board tradition, will continue to provoke the ire of proxy voting advisors which could have a substantial impact on the next round of elections with 6 out of 10 board members up for re-elections. 

With substantial time needed for preparations for the next meeting (proxy statement prep, proposal vetting, etc), the actual time to act is limited to a fairly small ~6 month window. I’m on the edge of my seat!

Bulldog’s 13D

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Bulldog Investors, LLP filed a 13D last night declaring their ownership. With the filing came in exhibit containing a proposal for shareholder approval of share issuance.

Reading between the lines, the proposal appears to me to be an appeal to avoid the inevitable litigation that would accompany a largely unwanted deal.

It remains clear that management and investors have very different incentives and have very different priorities.

I wonder if Bulldog smells a deal coming on the heels of the sealed filing outlined in the prior blog post?

Will management use the ever-weakening-poor-governance-tainted currency that is TPL stock to engage in a deal? What return will they get on that currency?

Also note that cash returns (dividend, repurchases) are minimal. Cash is being hoarded. Management is has deals on the brain. Will the return on those deals meet the significant ROI hurdle that was proven by decades of TPL stock repurchases? Almost certainly not.

Entrenchment appears to be first priority.

M&A Hot Stove

tpltblogger11 Comments

Is it cooking?

Rundown of events:

-TPL wins judgement in court

-Defendants file for appeal and include a request for a stay of activity (no new shares)

-TPL (on Jan 5) files their opposition to the stay. Part of that opposition is a sealed affidavit of Chris Steddum, CFO.

-It costs me $46 a click to get court docs but not this time because the affidavit is SEALED.

What’s so secret? What does the sealed affidavit contain? Is the company cooking something up?

What kind of outfit is going to take payment for itself or for assets in the form of a stock of a company that sues its shareholders regularly? A desperate one, probably.

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.

Deemed Vote in Favor (8-K)

tpltblogger17 Comments

Press release

8-K

As previously disclosed, once a final order is entered and an amended charter is filed, the Company intends to use a portion of the newly authorized shares to affect a stock split of the Company’s common stock in the form of a stock dividend, and the Court has conditioned the Share Authorization Proposal on such a stock split. In addition, the Share Authorization Proposal increases the number of authorized, unissued shares of common stock.

A split unlocks the authorized shares which could potentially be used to dilute the voting rights of current shareholders by 50%. I have no idea on timing but c-suite and modern corporate board incentives (empire expansion, comp expansion, ego, the thrill of the deal, boards prioritizing management over shareholders to get other seats) would have me guess that it is a top priority. Things shareholders care about (ROE & ROA maximization, margin expansion, return of capital, share price expansion) are lower on the priority list.

IIRC, transactions below 20% dilution can be done without shareholder approval. All transactions (I think) need board approval.

Meeting Notes from an Attendee

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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.