I don't think the selloff is due to the ERC comparison, but rather worries about the gross margin....going from >20% to 13% in Q3.

I'd guess there's also worry about the missed deadlines with regards to the Wal-Mart tool and the extrusion pallet line. Maybe some other worries about the new CFO leaving only after 9 months....I'm surprised there wasn't a question about that on the call.

My feeling is that the market is in show-me mode. I'm happy to hold though, as margins are still 19% for the year, and the other issues are presumably just speed bumps. I'm guessing the pipeline is still filled with the opportunities that Kruger was talking about on the Q2 call.

$4.25 million of sales for a single distribution center is also not too shabby....Wal-Mart has 210 of those things in the US.

If they're serious about buying back stock, this selloff is actually a good thing.

It’s currently under appeal to the TX Supreme Court. I wonder when we’ll get financials. How long can it take to audit ~30 loans?

The new CFO resigned on April 1 to "pursue other opportunities." Bill Rahhal resigned at the end of 2023, so the new CFO was only in charge for 3 months? Hopefully some light will be shed on the call (presumably) next week.

Looks like one of Greystone’s warehouses used to store inventory was destroyed by fire last month.

https://www.ourquadcities.com/news/local-news/camanche-warehouse-destroyed-by-fire/

There are hardly any shares short. I'm guessing someone put in a market order rather than a limit order.

The only news I've seen / noticed is that the 44 x 56 pallet that Kruger mentioned on the Q1 call is now up on Greystone's website, so they're presumably selling it. That's hardly earth shattering news though.

That’s odd, as the Form 8937 is posted on UDF’s website. Maybe they didn’t send it to whatever place (brokerage, transfer agent, custodian, etc?) they were supposed to.

All of the distributions in 2023 were return of capital.

Bylaws were amended to get rid of (some? all?) of the restrictions that were put in place to keep NexPoint from nominating or serving as trustees.

Baby steps.

I was surprised to see this trade down during / after the conference call. Maybe I'm misreading it, but Kruger basically announced a 3-year contract with Wal-Mart, discussions with another "huge" customer (going as far as saying he thought they were going to place an initial order 60 days ago), and seemed confident on margins remaining high. They never put out a release regarding Simplot, but I imagine they're one of the 3 current "major customers."

I'm guessing people sold because of a "softer" Q3 and because he wasn't as confident now that FY 2024 sales would beat FY 2023. Seems a bit short-sighted to me.

I don't put a lot of stock (no pun intended) in the stock buyback announcement (volume's not high enough to buy in the market and who knows if any shareholders will offer to sell shares...maybe if Bill, the old CFO, wants to sell his shares now that he's retired), but it's definitely not a negative.

Good point. Forget sending Hollis and the felons a thank you note.

Please send me one!

Looks like you had to hold between 2011 & 2015. Congrats on getting something!

Be sure to send Hollis and the other felons a thank you note

Did you have to hold shares at a certain point in time to receive that?

Yeah, if Kruger is correct about the 2nd half of the year being better than the first, then things are looking good.

Hoping to hear updates on Wal-mart, Ball and the beverage & fire retardant pallets.

Also, did you know that Cabka is publicly traded? It's nice to have another comparable company to look at. Kruger mentioned them as a tough competitor in one of the prior conference calls.

https://investors.cabka.com/

Unfortunately, I agree.

Another year of no income. All of the distributions in 2023 were ROC.

8+ years after Bass’s post and they’re still entangled in lawsuits and making no money. I wonder how much the Advisor has made in that time period.

They filed yet another appeal on the Nexpoint suit…this one with the TX Supreme Court. Far as I can tell, the lawsuit was filed almost 18 months ago and discovery still hasn’t started. Makes you wonder what they are they hiding this time.

Two questions were answered.

What are the trust's future plans - it'll continue to originate loans.

What is it doing about shareholder liquidity - likely will never list on NASDAQ again and they are exploring other liquidity options.

First annual meeting in 8 years, and those are the only questions they answered. Meeting literally lasted ~10 minutes, and 2 of those minutes were dead silence to give shareholders time to vote.

Gotta tell ya, I've been to two companies' annual meetings in my life. Berkshire and UDF.

I can't imagine one better than BRK or worse than UDF.

Anyone else submit a question that wasn't answered?

Thanks. I was able to find the control number. When you go to vote, it's in the upper right hand corner of the screen in the blue bar.

I miss the days when companies would announce that they were “cutting their dividend” or “declaring bankruptcy” instead of saying they were “strengthening their balance sheet.”

Orwell would be proud of the modern day corporate IR/PR flaks.

Does anyone know how to get the proxy control number if you hold shares at Schwab?

I was able to submit a question through Schwab’s site, but am not sure if I’ll be able to login to the meeting.

Does anyone know how to get the proxy control number if you hold shares at Schwab?

I was able to submit a question through Schwab’s site, but am not sure if I’ll be able to login to the meeting.

UDF lost its appeal in Nexpoint’s suit. I wonder what their next delay tactic will be.

Has anyone submitted questions for the annual meeting?

A few I’d like to see answered:

Why have the trustees punished the shareholders (who had nothing to with Bass) by staggering the Board, not holding a meeting in 9 years, not allowing shareholders to vote on all the trustees this year, not providing any financial information for ~6 years, etc.

Given that UMTH was running a ponzi scheme with the trust’s assets, why haven’t the trustees fired them and hired a new advisor?

Why doesn’t the Trust cease operations and liquidate?

Why did it take so long to get audited financials? Surely it’s just a coincidence that an auditor couldn’t be hired until AFTER the felons’ appeals were turned down.

I assume questions about the payment of the felons’ legal fees and SEC settlement will be ignored since it doesn’t pertain to the business of the annual meeting.

I assume any question about NexPoint and the lawsuits would get a boilerplate response about NexPoint not filling out the questionnaire.

I think we're conflating two different things. The broker non-votes are only required for a quorum.

Once they have a quorum, the trustee only needs a plurality of votes to be elected.

I don't know how it all works, but assuming brokers are required to submit non-vote proxies for any shares they hold, then if >50% of shares are held in brokerage accounts, UDF will get its quorum.

If that's not the case, then I don't see how UDF would ever get a quorum....which mgmt would probably use as a justification to keep things just the way they've been (as they've done for the last 8+ years).

In the 2015 election, there were zero broker non-votes. As you said, maybe things have changed though.

https://www.sec.gov/Archives/edgar/data/1440292/000114420415039309/v414194_8k.htm

Although, I actually think a no vote would send a stronger message. A lack of voting could just be taken as a sign of indifference.

Are you sure that's correct?

From the last proxy filed with the SEC (I assume this year's proxy is similar):

"Abstentions and broker non-votes will be counted to determine whether a quorum is present. A broker non-vote occurs when a broker, bank or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that matter and has not received voting instructions from the beneficial owner."

I read that to mean that if you hold your shares at a broker, and don't fill out the proxy, the shares will still be counted for quorum purposes.

Given the lack of insider & institutional ownership, I'd be shocked if they could get 50% of shareholders to actually vote.

I believe NexPoint initiated the tender offer just to get a list of shareholders. If not that, then it was for a reason other than actually buying stock. They were already at the ownership cap, so they couldn't buy any regardless of how many were tendered.

UDF management put the cap in place as another way to entrench themselves, along with staggering the Board, refusing to hold annual meetings and not allowing shareholders to vote on directors for 8 years.

Because nothing says, "Shareholders should be content with current management" like 20 years worth of prison sentences, a deregistered stock, sanctions for the auditor, etc etc etc.

"How many shares did Nexpoint acquire at $1.10... anybody?"

zero

Well....all of the current trustees oversaw a business that was convicted of being a ponzi scheme (or ponzi-like, if you prefer). So they don't exactly have clean hands.

Like I said before, let the shareholders vote. If Dondero's a crook and UDF shareholders want to vote him in, then let them. What's it say about the current trustees that they think Dondero is a crook and that they're also afraid he'd beat them?

Also, NexPoint only owns ~5% of the stock...it's not like they have a controlling position.

Finally, how many shares of UDF IV do the current trustees own? Based on the last proxy filed with the SEC (the 2023 proxy doesn't contain share ownership information):

Phillip Marshall - 2,000 shares
Heath Malone - 4,347 shares
Steve Finkle - 20,000 shares
James Kenney - not listed in last proxy...I assume 0, unless he bought some after it was deregistered.
Lawrence Jones - not listed in last proxy. I assume 0, unless he bought some after it was deregistered.

So the trustees own a total of 26,347 shares. That's less than I own. And they're telling me who I can & can't vote for? Why do they care so much....maybe because they want to keep the gravy train rolling.

Thanks for posting that.

From the letter, "The stock price of NXDT, NREO’s parent company, is currently trading at a discount of approximately 70% to its book value and has declined 64% over the past 5 years."

Well, at least it's still trading...

One thing I've never understood about corporate elections (in general, and in UDF's case)...if the trustees are so confident that they've treated shareholders well, then why don't they un-stagger the board and let the shareholders vote on all the trustees this year?

If they done such a great job of steering this ship through the Bass-infested waters, then they should have no concerns about being re-elected.

For some reason, UDF management has chosen to treat all shareholders like shit, even though it was only Bass (a non-shareholder) that caused them any problems. If this management team had any integrity at all, they'd all admit that UDF needs new leadership (even if they personally did nothing wrong) and resign immediately.

I voted against them. According to a NexPoint suit, they are led by an ex-employee of Whitley Penn, UDF IV's old auditor. And we all know what a bang up job Whitley Penn did on the audits.

If they'd clean house, they'd have no problem getting an auditor. IMO, their proclaimed "difficulty" was nothing but a bullshit excuse because they didn't want financials to come out before Greenlaw's trial (or appeal).

UDF V is liquidating. The last update says it's currently not originating any new loans and "intends to continue returning capital...as the portfolio liquidates."

Its last remaining loan was supposed to mature in 2023, but they extended the maturity date to 2025. Got to keep that gravy train rolling, I suppose. I wonder how much Kenney is paid from UDF V.

Also, the opening of their shareholder letter boasts that they've made "total cash distributions to shareholders to over $32 million." Of course, a glance at the balance sheet shows $52 million of paid-in capital....so shareholders give UDF $52, UDF gives shareholders back $32 and has remaining assets of $12.

And UDF apparently wants a cookie for their stellar performance.

Since each shareholder is only allowed 1 question at the meeting, we might want to coordinate questions as well. Otherwise, we'll probably all submit versions of the same "What's a guy gotta do to get fired around here?" question.

Well, if you think the Trustees have done a bang-up job, then vote yes. Otherwise, vote no. The vote doesn't have any impact on whether or not he gets elected, and none of these clowns have any shame, so it really doesn't matter.

Schwab sent out the proxy today. Captain Jim is involved in some related party transactions...he's as bad as the rest of these clowns.

He's paid $500k, $476k of which is paid from UDF IV. Funny how all of the other employees are paid out of the Advisor (and whose salaries are presumably covered by the advisory fees that UDF IV pays), but Captain Jim, whose position was mandated by a court settlement, is paid out of UDF IV.

So the Advisor runs the business in such a way that 4 of its executives go to jail, the stock is deregistered, etc etc. A court settlement then requires that a Chief Compliance Officer is appointed....and instead of the Advisor bearing the cost of said appointment, it makes the shareholders pay for it.

You can't make this shit up.

Assuming no hiccups, if they apply all the FCF to debt, they could have zero net debt in 12-18 months. If they're generating $15 million of EBITDA at that point, the current price would be 2x EV/EBITDA. If they are able to get closer to the $100 revenue mark and can maintain these margins, the multiple would obviously be even lower.

Do you know if the preferred has a mandatory conversion feature?

That's good to know, thanks.

Did you notice that their website's "about" section now discloses the total # of pallets produced?

17,566,126 pallets from 2003 - 2022
5,473,584 beverage pallets from 2003 - 2022

It'll be interesting to see how often they update it. Maybe they'll be the McDonald's of the pallet industry (billions & billions served).

Yep, nice to see. I haven't gone back and calculated the ttm EBITDA, but I'm guessing if you exclude the preferred, gross debt is now less than 1x EBITDA. Working capital is also positive and margins are fantastic....quite a turnaround from a few years ago.

That's with presumably no sales to Wal-Mart (unless Wal-Mart is no longer pre-paying for its pallets). If they can start closing on some of the deals they talk about in the conference calls and work their way up to $100 million in revenue, this thing could really run.

I'm not a member, so can't reply to messages. You can email me at kobrien2001 at yahoo if you want though.

EI, if you're into the reverse split game, you might want to look at AMMJ. Don't know if it'll work out, but it is potentially interesting.