Big Win for The Good Guys - "Board Refreshment" at Texas Pacific Land Corp.
Big news, that was a long time coming, from Texas Pacific Land Corp. (TPL). After the August 1st close, TPL announced a “Board Refreshment”. Specifically, the two co-Chairs, David Barry and John Norris, will retire from the board at the 2023 Annual Meeting. Furthermore, TPL announced that it has entered into a Cooperation Agreement with board members, and large shareholders, Murray Stahl and Eric Oliver. I’d like to go through the agreement and provide my thoughts on it. I’d like to preface it with the following sentiments. First, the governance and management of TPL has been beyond atrocious. Change cannot come quickly enough in the minds of many shareholders. Second, this agreement, no matter how imperfect, shows the tides are shifting and change is coming. Third, I believe that Horizon Kinetics and Softvest (HK/SV or HK and SV) want to move forward with fixing the governance and management and is less concerned about extracting vengeance and winning every single point.
Major Provisions of The Cooperation Agreement:
Board will nominate Marguerite Woung-Chapman, Robrt Roosa (named in press release not the Cooperation Agreement), and Murray Stahl.
The pre-signed letters of resignation by Stahl and Oliver will be considered withdrawn and not effective.
HK/SV will vote for the board’s slate of directors.
As long as HK and SV serve on the board, without written consent of the company, they will not disparage the company, employees, and current or former board members. The company agrees to the same regarding HK/SV. The current legal proceedings are excluded from this clause.
As long as HK and SV serve on the board, they will not run additional directors, encourage others to run, or publicly support shareholder proposals.
The original Stockholders’ Agreement shall terminate at the end of 2023 Annual Meeting which shall happen before December 31, 2023.
Thoughts on the above provisions:
I have no issue with the new board members. My main reason for having little concern, despite having little information about them, is that post the Annual Meeting, HK/SV will be free to vote as they wish. Board members should understand that if they wish to remain on the board, it would be best not to upset two shareholders who collectively own 20%+ of the stock.
Non disparagement agreement. Again, I am fine with this. HK/SV doesn’t need to say anything publicly. The company has good oversight by shareholders (we owe TPL Blog a debt of gratitude on this front), so there will be plenty of people who will make noise if the board takes actions that are not in the best interests of shareholders. Furthermore, HK/SV can speak with their votes. Also, the without prior permission part of the clause does leave open the possibility of going after the co-Chairs if more bad actions on their part come to light (recall that the Shareholders’ Agreement prohibited HK/SV from reviewing TPL books and records).
Standstill provision. Should it be the case that a board member needs to be replaced, there is plenty of shareholder oversight on the company and a slate of candidates can easily be put together. And while HK/SV cannot publicly support a candidate, they can vote for them.
Conclusion:
Overall, this is a big win for shareholders. Kudos to TPL Blog and Gabi Gliksberg from ATG Capital for keeping the spotlight on the board. Kudos as well to Murray and Eric leading the fight from the inside and dealing with a painful lawsuit. This agreement is not perfect, but it shows that change is coming. In that light, an outstanding question is why hasn’t management ceased prosecuting the lawsuit? They have to know that the tides are shifting and if there is any hope in remaining in their positions, or leaving with dignity, they should cease wasting shareholders’ money on this ridiculous lawsuit.
Disclaimer: For entertainment purposes only. Due your own due diligence. Not a solicitation to buy or sell any security.
Thanks for the summary.