PICO Holdings, Inc. (Nasdaq:PICO), based in La Jolla, Calif., is a diversified holding company reporting recurring losses since 2008. PICO owns 57% of UCP, Inc. (NYSE:UCP), 100% of Vidler Water Company, Inc., a securities portfolio and various interests in small businesses. PICO has $662 million in assets and $426 million in shareholder equity. Central Square Management LLC and River Road Asset Management LLC collectively own more than 14% of PICO. Other activists at http://ReformPICONow.com/ (RPN) have taken to the Internet to advance the shareholder cause.
The bloggers note that, while PICO prepared to remove former CEO John Hart from its Board via written consent, Mr. Hart resigned on his own. “No sooner had the ink dried on the Consent Statement, than Juicer resigned. A day later, PICO withdrew the Consent Solicitation. As always, lawyers were happy.
Except for his status as “Payee” on $11 million in checks from PICO, Juicer now has zero affiliation with his employer of over 2 decades (although he is still a UCP Director). All that remains are the $11 million in checks, paid for by PICO shareholders.”
The bloggers are impressed with new PICO CEO Max Webb’s clarity in reporting Q3 earnings. “The most interesting aspect of the earnings call was Mr. Webb and his clear, honest communication with the owners of the business. Juicer’s communication was always deceptive and evasive — when he chose to communicate. Raymond “Delaymond” Marino’s communication is evasive, delusional and overly schooled by lawyers. Refreshingly, Mr. Webb was frank and direct. We were impressed and if Mr. Webb’s execution corresponds to his speech, PICO shareholders may be forgiven if they feel a tiny bit of optimism.”
The bloggers speculate that PICO will begin the sale process for its stake in UCP. “UCP is up against the wall. Revenue has grown, but earnings are weak and every quarter brings a new charge. Shareholder equity has not budged in the 3 years since UCP went public — it was $218.6 million in Q3 2013 and now is $217.5 million. Corporate governance is poor. And with the aborted $200 million debt issuance, UCP is staring at a wicked $145 million in maturities over the next year, plus $32 million in payables for lots.
According to the bloggers, “We suspect that UCP CEO Dustin Bogue and Chairman Michael C. Cortney are tired of having their shortcomings publicized on RPN and eventually fed through Bloomberg and LexisNexis for thousands of readers. Both own significant amounts of UCP shares and will benefit financially from a change in control. We would not be surprised if events moved quickly at UCP. Now is a great time to sell a poorly-managed, uncompetitive homebuilder with valuable land.”
The bloggers extend gratitude to Andrew Shapiro, of Lawndale Capital Management, for his persistent and insightful questioning of PICO Executives and Directors. “Much of the information provided by PICO representatives was prompted by questions from Mr. Shapiro. PICO shareholders are fortunate to have Mr. Shapiro on our side. If not for his assertiveness, all of us would be information poor in relation to PICO. Mr. Shapiro deserves our applause.”
The bloggers are not fans of Chairman Marino. “Delaymond has criticized RPN in private on several occasions. Given our dedication to shareholder value, we found his posture puzzling. We became worried when Delaymond issued flowing compliments to Kenneth Slepicka, a corporate wrongdoer, but criticized RPN in private.
“We gave Delaymond a chance. We wrote complimentary of him on several occasions. Due to his resume, we proposed that he fire Juicer and assume the CEO role of PICO. We wrote about some of his notable business achievements. We pleaded with him to escalate the PICOGate investigation for the benefit of shareowners. None of it appears to have made any difference to our non-elected Chairman. And he continued to criticize RPN.
“As avid readers know, we passed on the opportunity to pursue an SEC Whistleblower Award, potentially worth $250,000 or more, when we published PICOGate. We don’t see Delaymond making any quarter million dollar sacrifices for the benefit of shareholders.
At some time, dissonant couples realize that things are not going to work out. We have concluded that Delaymond is not our type of Director. We view his slow pace as value destructive, his caution as a form of omission, his criticism of RPN as unperceptive, and his unwillingness to change his palace coup plan when we broke PICOGate, as $11 million too rigid.”
The bloggers are pleased, but not satisfied. “We maintain that the PICO Board needs another Director or two. We believe that Delaymond and Hapless Howie have created a culture on the PICO Board that is Director-oriented. As the $11 million termination payment shows, this Board collectively is not looking out for shareholders’ best interests.
“We hope that the PICO Board does not make the same mistake with our Red Hawk revelation as it did with our PICOGate story. We hope the PICO Board invests the de minimis amounts to ascertain if Juicer and Mr. Bogue committed improprieties against shareholders when PICO purchased the Red Hawk Community out of foreclosure, thereby releasing Mr. Bogue from his underwater personal guarantee on the Red Hawk loan. If wrongdoing is discovered, PICO should seek recourse from Juicer and Mr. Bogue.
“We are impressed with Mr. Webb’s first earnings call. His speech was free of absurdity and evasion. He was clear, direct and offered numbers and dates. If his actions match his words, PICO shareholders have reason to be optimistic.
“We hope Mr. Webb and Delaymond take a firm stance with UCP. The business model is flawed. The executive team is not competitive. The corporate governance is Hart-ish. The returns are pathetic. Value is destroyed with every home sold. There is only one conclusion: Pull the trigger.”