As originally appeared in the Troubled Company Reporter.
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/ have taken to the Internet to advance the shareholder cause.
The bloggers note that since UCP’s IPO in July 2013, CEO Dustin Bogue has been a net seller of thousands of shares. Given his constantly declining economic interest in UCP, the bloggers question Mr. Bogue’s incentive to create value for shareowners.
According to the bloggers, “Following the IPO, Mr. Bogue unloaded thousands of UCP shares at high prices. As UCP’s results collapsed, Mr. Bogue continued to sell thousands of shares. Below we show Mr. Bogue’s UCP share activity. On several occasions, Mr. Bogue delivered shares to pay for the exercise price or the tax liability related to share awards or share sales. We include these shares as ‘sold,’ as they were used to extinguish an economic liability.”
Mr. Bogue has only purchased UCP shares once: On November 24, 2014 — 4,350 UCP shares at $11.81, for a total cost of $51,374.
On July 23, 2013, concurrent with the IPO, Mr. Bogue was granted 166,667 restricted stock units (to be exchanged for Class A shares), which vested in thirds on December 31, 2013, July 23, 2014 and July 23, 2015.
The bloggers show Mr. Bogue’s UCP share sales from IPO to the present:
Date # Shares Price Est. Proceeds
——- ——– —– ————-
Jan ’14 55,555 $14.70 $817,000
Jul ’14 28,990 $12.16 $353,000
Aug ’14 26,566 $13.00 $345,000
Feb ’15 847 $9.05 $8,000
Jul ’15 20,878 $7.18 $150,000
Nov ’15 40,000 $7.70 $308,000
Feb ’16 1,679 $5.96 $10,000
Totals 174,515 $1,991,000
According to the bloggers, “Sharp readers will note that our ‘# Shares’ tally exceeds Mr. Bogue’s original grant. On February 26, 2014, Mr. Bogue was awarded another parcel of 74,211 RSUs and stock options.”
“While trashing UCP’s stock down from $15 per share to its current price of $8.70, a loss of 42% in three years, Mr. Bogue has reaped almost $2 million in proceeds from share sales. Assuming 19 million UCP shares, Mr. Bogue has destroyed $120 million in shareholder value while enriching himself by $4.2 million ($500,000 annual base salary plus a $250,000 bonus in 2014 and a $200,000 bonus in 2016). Mr. Bogue has prospered while all other shareholders, including PICO Holdings, have suffered.
Michael Cortney is Chairman of the UCP Compensation Committee. Fellow Comp Committee members are Peter H. Lori and John Hart. We have no idea why Messrs. Cortney, Lori and Juicer awarded Mr. Bogue a $200,000 bonus in 2015, given that UCP’s stock price declined from $10 to $7. Perhaps the UCP Compensation Committee feels that increased revenue outweighs a value destructive 3% return on equity.
The few good Directors on the PICO Board need to play a more active role in their investee. The UCP Board is in need of adult supervision. We believe that, before any 2016 compensation decisions are made, Juicer needs to be removed from the UCP Compensation Committee – and from the Board entirely. UCP shareowners deserve better. PICO and its shareowners will be better off as well.”