TPL management views an eventual share authorization as a key piece of the puzzle to position TPL as a consolidator long term. We believe management views the steps the company has taken over the past several years as setting it up to be an eventual consolidator (e.g. C-Corp conversion, new Board of Directors, enhanced operational disclosure, new accounting firm, recent hires, etc.). And that adding a share authorization is a key piece to their long-term outlook for the company. Since we initiated coverage, it has become increasingly clear that this is in direct contrast with a group of vocal long-term retail shareholders who want to see the company return to its roots (TPL was originally a liquidating trust) with a focus on continued share buyback, maximizing margins/capital efficiency, and an aversion to large-scale M&A activity. Our view is that as management fully articulates its strategic outlook, it will likely drive an accelerated shift in the investor base toward an institutional audience.

If share authorization for M&A is so important to management, why isn’t it on the proxy this year? Is it possible that the board and management aren’t aligned on this? And why does CS keep beating this drum? Who is feeding this line of thinking to CS?

Credit Suisse Initiates Coverage On Texas Pacific Land with Underperform Rating, Announces Price Target of $800

https://seekingalpha.com/news/3745827-texas-pacific-land-tumbles-as-credit-suisse-slaps-with-sell-equivalent-rating

TPL’s first annual shareholder meeting is scheduled for November 16th, which means the proxy statement should be out by October 7th at the latest. We expect all three of its Class I directors (Barbara Duganier, Dana McGinnis, and CEO Tyler Glover) who officially joined the board in January to be nominated for reelection, and while we were hopeful to see a share authorization proposal, we believe that is more likely a 2022 event. That said, we believe a share authorization would be a meaningful potential positive that would enable the company to include stock-based compensation as part of its long-term incentive plan (LTIP) for management. In addition to greater transparency around the process, we believe including stock-based comp to its LTIP would help address concerns around greater incentive alignment between management and shareholders. In Figures 12-13, we provide a comparison of management plus board ownership to the rest of our royalty coverage universe. Notably, without a share authorization, TPL is also unable to use equity to help finance a large-scale acquisition.

Two things are apparent:

1) CS is attempting to frame TPL as a yieldco though it has never traded as such. That said, it might be good for management to think about the signal they are sending with the dividend. Appears as if high div = low multiple.

2) The pressure to turn this thing into a management/Wall Street enrichment vehicle (see above) will continue.

If you turn it into a shitco, it will trade like a shitco.