LSB Industries reports Q1 earnings in a few days, and they just gave their CEO a large one-time grant. Suspicious timing to say the least.

I’ve been tracking LSB after I noticed a signal a few months ago but nothing came to fruition. Then, on April 24th, LSB granted its CEO/Chairman, Mark Behrman, 706,880 RSUs worth ~$10.3MM. The 8-K and Form 4 were uploaded to EDGAR a few business days later.

This grant stands out for the following reasons:

• LSB is set to report Q1 earnings after market close on April 29th, and this grant comes less than a week before the earnings release

  • It’s safe to say that the executives and compensation committee know what Q1 earnings/guidance will be.

  • They would not grant these RSUs if earnings were going to disappoint and tank the stock. If so, the RSUs would be granted after the release.

• This grant is off-cycle

  • LSB executives just received their yearly RSUs in early February, so this is odd timing and double-dipping for Behrman.

  • In addition, LSB has no history of providing retention grants to executives.

• The size of the award is much larger than Behrman typically gets

  • Behrman typically receives yearly equity worth $3-3.5MM, which makes this ~$10.3MM grant three times larger than normal.

• The LSB board is structured in a way that could make a spring-load happen

  • Long story short, Todd Boehly (Eldridge Industries) got involved through a convertible preferred stock deal in 2015. After swapping for equity and selling down his stake, he currently owns 14.5% of the shares, and has two board seats. Both of these board members sit on the compensation committee and can exert significant influence.

• This grant could truly be a retention tactic

  • In February 2026, the board entered into a side letter with Behrman that allowed all of his outstanding awards to vest upon a qualifying retirement. By my rough estimate, he is ~1 year away from qualifying for retirement.

  • What’s interesting is that the current RSU grant cliff-vests in 3 years, but that the side-letter retirement provision specifically does not apply to this grant.

  • If I wanted to retain and incentivize a CEO for a few more years, then I’d give him lots of RSUs right before a strong earnings print. The ensuing stock price pop would increase the value of the pot and provide a nice dangling carrot.

This seems like an asymmetric event-driven opportunity.

“♡ Like” this piece if I’ve predicted 7 of the last 3 spring-loads.

Rapid7 - NASDAQ: RPD

• 1.125MM PSUs awarded to its CEO based on stock price thresholds (undisclosed).

• JANA Partners is involved here as an activist and has recently signed a nomination agreement with the company.

Ulta Beauty - NASDAQ: ULTA

• Awarded 68,000 options to its CEO vesting based on share price CAGRs of 8-18%. This is in addition to her annual option award, and nearly twice as large.

• Ulta stock recently dropped ~20%.

Invitation Homes - NYSE: INVH

• Gave large retention RSU packages to its top executives which were equivalent to ~1 years worth of equity awards. The stock is currently hitting 5-year lows.

Intrepid Potash - NYSE: IPI

• Entered into Change in Control agreements with the remainder of its executives who didn’t have one (this was buried in the 10-K).

• There are some large active managers in the cap table and on the board (with 13-D’s) who might be setting the table to run a process. Intrepid recently sold-off its least attractive Oilfield Solutions assets for ~10% of its market cap.

Alnylam Pharmaceuticals - NASDAQ: ALNY

• Gave its CEO a large special PSU based on some very high stock price hurdles.

Superior Plus - TSX: SPB

• Adopted a stock option plan in late 2025 based on the board’s renewed focus on share repurchases instead of dividends. This goes against the general trend of moving away from stock options.

• The CEO was granted 1.5MM options at $8.00 on November 24, 2025

“♡ Like” this piece and message me if you have special insights on any of these companies.

This is a challenging conundrum for boards. You’re likely not to blame for the precipitous stock decline, but the board can’t go back in time and fix that mistake. Or can they…

On February 18th, Fiserv’s board approved a supplemental equity award to its CEO, Michael Lyons. It comprises:

• $18MM in PSUs

  • Cliff vest after three years, subject to achievement of performance goals tied to relative total shareholder return and the One Fiserv action plan

    • Performance metrics for the One Fiserv action plan will be set in connection with Company’s 2026 investor day

• $12MM in RSUs

  • Vesting over three years

In addition, Lyons is eligible for his annual equity grant, which the board decided to grant on the exact same date.

• $11.2MM in PSUs

  • Cliff vest after three years subject to achievement of performance goals tied to relative total shareholder return, adjusted revenue growth, adjusted earnings per share, and free cash flow conversion

• $7.5MM in RSUs

  • Vesting over three years

Although the board could technically just issue supplemental equity next year if the stock craters again, I would think that large shareholders, ISS, and Glass Lewis would have something to say about it the second time around.

There’s a lot riding on this award. The board granted nearly $50MM all at once, and didn’t even try to diversify over a certain time period. They better hope that they got the timing right.

“♡ Like” this piece if we should cue the world’s tiniest violin for Michael Lyons.

Imagine you buy a nice bulletproof house in a good neighborhood for a million bucks. Things are great for a while, but then, suddenly someone starts shooting at your house. Now, everything’s holding up fine so far (on account of it being bulletproof), but after the millionth bullet, you start to doubt how bulletproof it will be after the next million bullets. As time goes on, the shooter also appears to be improving significantly.

What do you think the fair value of the house is? Well, maybe not zero, but probably south of a million bucks.

Welcome to the SaaSpocalypse!

There is literal carnage going on in SaaS-land. Terminal values are being destroyed left & right, with investors selling first and asking questions later.

Whether you think SaaS is completely doomed or going to the moon, one trend that has started to gain some momentum is making personnel changes to lead companies through this period of significant change. Recent examples include: Salesforce, Oracle, UiPath, Klaviyo, and many more.

On February 6th, Workday, a $33bn market cap human resources software business, joined the deck-chair reshuffling by replacing its CEO with Aneel Bhursi, its executive chair. Aneel’s time at Workday is summarized as follows:

• Co-Chief Executive Officer from August 2020 through January 2024

  • His transition to executive chair from co-CEO had been telegraphed in a press release from December 2022

• Chief Executive Officer from 2014 to August 2020

• Co-Chief Executive Officer from 2009 to 2014

• President from 2007 to 2009

• Co-founded Workday in 2005

Fast forward to today, with Aneel describing his return as CEO:

We’re now entering one of the most pivotal moments in our history. AI is a bigger transformation than SaaS — and it will define the next generation of market leaders. I’m energized to return as CEO, working alongside our presidents Gerrit Kazmaier and Rob Enslin, and I’m excited about the opportunity in front of us.

While the announcement and timing is intriguing, the compensation structure is what we were curious about:

• $1.25MM salary

• 200% bonus opportunity

• $60MM in RSUs vesting over four years

• $75MM in PSUs

  • Five year performance period with various tranches based on stock price targets (not yet disclosed).

• Not eligible for additional equity awards until 2027

The press release notes that the grant date for both the RSUs and PSUs is March 5th. With Workday set to announce FY 2026 results after the close on February 24th, I can’t help but think that he may want to kitchen sink guidance a bit, so that his awards can be priced off of a lower base.

While the dollar amount of Aneel’s award is significant on an absolute basis, it’s important to remember that it’s still smaller than the ~8.5MM shares he currently owns worth ~$1.1B. It’s also worth noting that the stock voting agreement with his co-founder represents ~70% of the voting power.

It’s safe to say that Aneel (age 59) could’ve rode off into the sunset with his billion and left this difficult transition for someone else to figure out. However with founders, sometimes these business transitions feel deeply personal. As a writer that typically focuses on incentive compensation, one needs to realize that billionaires typically desire something even more important than money: long-term reputation.

It’s also probably quite personal for Aneel because Peoplesoft, a firm he co-founded, was the victim of a hostile takeover by Oracle in 2004 during the wreckage of the dot-com bust. There is almost certainly a shark out there waiting to harvest Workday for the free-cash-flow and he most likely wants to prevent that.

Since the start of 2026, Workday is down ~30% due largely to AI fears. The stock is back to price levels not seen since the bottom of the 2022 bear market and the depths of the COVID crash.

Key questions include: Will power accrue to the agents completing tasks in the B2B software, instead of the software itself? Are systems of record businesses better insulated than others? Will revenue continue to be priced on a per-seat basis, or will it be based on outcomes generated for customers?

Time will tell whether the doomers or the bagholders are right.

As for the business itself, it continues to sport a 97% gross revenue retention, which is both world-class, and demonstrates the intense stickiness of the product. That said, revenue growth has been decelerating for the past 4 quarters.

At today’s stock price, Workday trades at ~3x EV/NTM Revenues, which is the cheapest it’s been in a very long time. With its ~75% gross margin and ~9% EBIT margin, one could imagine costs could be optimized if there was true intent (Sales & Marketing expense is ~27% of revenue).

The general consensus among tech investors today is that Workday R&D productivity is the lowest they’ve seen of any tech company, ever. So there’s likely a ton of visceral fat to trim there as well.

It is also worth noting that share-based compensation (SBC) as a percentage of revenue, gross profit, and adjusted EBIT have been falling for the past 4 years.

Employees have cheered on Aneel’s return, specifically calling out the reduction in SBC as a negative. The historical compensation structure for the entire SaaS space relies on heavy SBC and price appreciation to bail them out. Returning to that would not be positive for the stock!

While some are rightly skeptical of the willingness of SaaS companies to optimize their margins, we note that their ability to do so has been more than proven-out.

In October 2025, we got a sneak peek into how the biggest private SaaS investor, Thoma Bravo, thinks about their buyout model. On the All-in podcast, Orlando Bravo alluded to 45% normalized EBITDA margins for SAAS companies that they’ve bought. Here is a basic outline of the model described in the podcast:

At the end of the day, SaaS is currently a falling knife drenched in the blood of those with more courage than us. Whether the multiple compression reflects future business prospects or not remains to be seen.

We know that Aneel has tremendous amounts of reputational and financial risk on the line, but will that be enough?

As one peruses the exhibits in the Edgar filing, we see that the stock price targets are quite lofty and range from $35-110 per share.

There’s a subtle sleight of hand here that is easy to miss, but obvious, once we take a closer look at the timing of the grant and overlay that with the stock price chart.

• On December 31, 2025 Dana stock closed at $23.76. .

  • This is the official start of the performance period for the PSUs.

• On January 21, 2026, Dana announced preliminary 2025 results and their 2026 outlook.

  • Given the positive guidance, the stock increases ~10%.

• On February 6, 2026, the backward-looking PSUs were approved by the board.

  • On this date, the stock price was $31.69, which was a ~33% increase relative to when the performance period started on January 1, 2026.

To recap: At the start of February, Dana’s board sees that the stock has increased significantly in the past month and decides to selectively approve equity based on a performance period more than one month old.

This timing difference was clearly manipulated to favour Dana executives because of the backward-looking nature of the award.

What’s even more egregious is that the first stock price hurdle for the award is $35, which was a mere ~10% away from being achieved during the February grant date. Had they granted it at the start of January, it would have taken a 47% increase in stock price to hit that first hurdle.

To boot, this is the first time the company has made a grant of this style.

“♡ Like” this piece if you secretly admire these kind of governance dark-arts.

Centene recently gave out some executive grants, and they look a little odd...

One of my subscribers pointed out a recent interview, where he and Swen Lorenz discussed the idea of building an AI tool to detect “oddly-timed options grants or executive compensation changes”.

I’ve previously played around with building such a tool but I found that my non-technical abilities were a significant crutch (even with the help of LLM’s). The true difficulty is in obtaining high-quality and relevant results, and eliminating much of the noise. I’d guess that my current scraping method results in a hit-rate of less than 3%. Of that 3%, the majority don’t turn out to be fruitful ideas.

Either way, I hope someone tries to build this tool and invites me to be a part of the Beta Test group. Now, back to your scheduled programming.

Centene is set to release FY 2025 earnings on February 6, 2026. Interestingly, on January 26, they gave their entire executive team their yearly RSU/PSU grants. That seems like the ideal setup for a spring-load.

What we know:

• The board and management had the financial results in-hand when they granted the awards

  • The time between the awards and the release of FY 2025 financial results is two weeks

• Historically, executive awards are given in mid-march

  • These awards were given more than a month in advance

• The PSUs are only based on 3-year stock price performance

  • Previous year PSUs were based on three equal-weighted measures: pre-tax earnings CAGR, pre-tax earnings margin, and relative TSR

• Retaining executives in the healthcare space is incredibly important given the ongoing changes being made by the administration

  • Getting the timing right on large grants is incredibly important to ensure constant motivation and retention of executives

The evidence seems pretty obvious, but the company’s most recent proxy contains the following disclosure:

We historically do not strategically time long-term incentive awards in coordination with the release of material nonpublic information and have never had a practice of doing so. Accordingly, we do not consider the release of material nonpublic information in relation to the grant of such awards, and do not time such release for the purpose of affecting the value of execution compensation.

Do I believe that a disclosure like that precludes a spring-load? Absolutely not.

If I was providing research to a hedge fund, I’d tell them to buy some short-dated call options on the stock.

“♡ Like” this piece if you’d buy my research.

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On December 8, 2025, Klaviyo appointed Chano Fernández to the co-CEO position, with an effective start date of January 1, 2026. With his appointment came a $69MM grant comprising RSUs and PSUs. Fernández had been on Klaviyo’s board since 2023, and was elevated to Interim Executive Officer in September 2025, likely setting up an eventual CEO succession.

The grant itself was summarized in an “Intention Letter” which contained the following details:

• $33MM in RSUs vesting over three years

  • 50% automatic vesting if terminated within 18 months for “cause” or for “good reason”.

  • 100% vesting in a “sale event” if he continues service through to the closing date.

  • Number of RSUs granted = $33MM / 30-day average price of the stock ending on the effective date of the grant.

• $36MM in PSUs

  • Based on the following stock price hurdles: $40, $55, $70, and $85.

  • 5-year measurement period.

  • 100% vesting if terminated within 18 months for “cause” or for “good reason”, assuming the stock price hurdles are met.

  • 100% vesting in a “sale event” if he continues service through to the closing date, assuming the stock price hurdles are met.

  • Number of PSUs granted = $36MM / 30-day average price of the stock ending on the effective date of the grant.

On January 16, 2026, we finally got details on the amount of RSUs and PSUs issued to Fernández:

• 1,093,801 RSUs

• 1,193,238 PSUs

  • Share price hurdles of: $40, $55, $70, and $85.

  • The stock traded at ~$24 at the time of the grant.

• Granted on January 15, 2026.

While the share price targets are staggering, I also happened to notice something interesting about the timing of the award.

Although Fernández’s appointment to co-CEO was effective January 1, 2026, the grant itself was made on January 15, 2026. This timing difference isn’t all that uncommon but the fact that Klaviyo typically announces Q4 results in mid-February is interesting. Why would the board wait a full two weeks after he was appointed to grant him equity? Is two weeks enough time to get a preliminary “insider” view of Q4 earnings? Would they have delayed the grant subsequent to Q4 earnings if the results were going to be bad?

Fernández’s RSU grant is very large, and most boards would want to ensure that they “get the timing right”. It’s in nobody’s interest for a $69MM grant to be made, and have the stock drop 20% a month later on bad results.

While the potential spring-load is a great short-term trade, the large amount of PSUs given to him with high price hurdles is definitely intriguing. Based on my searches, Klaviyo has never given executive grants with price hurdles such as these.

To present the counterargument of the long thesis:

• Executives continue to sell into 10b5-1 plans, seemingly non-stop, and in large quantities.

• There have been a few recent and large secondary sales:

  • May 2024 - Founder Andrew Bialecki (~10% of the shares he had prior) selling 10.9MM shares at ~$34.

  • August 2025 - Summit Partners (~22% of the shares they had prior) selling 6.5MM shares at ~$30.

• Companies have shied away from spring-load grants since the SEC increased their scrutiny.

I’ll leave you with one powerful fact: Fernández was the chair of the compensation committee for two years until his appointment as Interim Executive Officer in September 2025.

“♡ Like” this piece to load that spring!

Previously targeted by an activist, NHI now finds itself updating risk factors and amending their Change in Control Severance Agreements going into proxy season…

NHI first came under pressure in April/May 2024 when activist investor Land & Buildings (L&B) announced their intention to vote against two NHI directors as a result of conflicts of interest, misaligned incentives, and poor corporate governance. L&B did not solicit proxies at that time.

Fast forward to April/May 2025, and L&B launched a proxy contest to elect two of its nominees to the board. Although both ISS and Glass Lewis recommended the L&B nominees, L&B fell short in a closely contested vote.

While the previous activism is fascinating, I find myself looking at two recent disclosures that seem to hint that more is to come:

• November 6, 2025: 10-Q updated risk factors

  • NHI added the following risk factor: “Stockholder activism efforts could cause us to incur substantial costs, divert management’s attention and have an adverse effect on our business.”

  • This risk factor was not present in the previous filings and confirms that activists are once again circling.

• December 19, 2025: 8-K amended the Change in Control Severance Agreements

  • The company amended the CiC agreements for each named executive.

  • The main changes made to the President/CEO’s CiC Severance Agreement include:

    • Added two line items to the “Change in Control” definition

      

    • Changed the “Final Average Compensation” definition to include an average of the previous two years earnings, instead of the last five years earnings (red was deleted; blue was added).

      

    • Increased the Change in Control severance payment from (2 x Final Average Compensation) to (3 x Final Average Compensation).

    • Removed part of the “Good Reason” definition as it relates to NHI ceasing to be publicly traded (red was deleted).

      

    • Added restrictions to the “Non-Compete” portion of the agreement to include non-solicitation of customers and employees.

    • Added restrictions on not being a board member, consultant, or advisor to competing companies for 12 months.

In my opinion, the changes to the CiC Agreements are oddly specific. So specific that the only reason an expensive lawyer would be making the changes is if there was an important reason to do so.

One can interpret these changes in one of two ways:

• The activist pressure behind the scenes could lead to board turnover, which may result in executives losing their jobs or lead to an eventual sale of the company. Amending the CiC agreements is purely precautionary and is a self-preservation tactic.

• The board is putting the company up for sale and is ensuring that executives are aligned to follow-through with the process. In this case, amending the CiC agreements is a result of a change in board strategy.

NHI is small relative to industry bellwethers Welltower and Ventas and could prove to be a good bolt-on acquisition for them. Its stock has lagged both companies since pre-pandemic, and I can think of one quick way to help close that gap.

“♡ Like” this piece if REITs are value traps until they’re sold.

PS: NHI has an upcoming master-lease maturity in December 2026 that is well-below market. L&B estimates that a renewal at market rates could increase NHI FFO by ~12%.

In early September, Intact Financial (TSX: IFC) granted its CEO hundreds of thousands of stock options. That number of options isn’t uncommon but the value is much more deceiving in this case because Intact stock trades at ~$270 per share.

To my American readers, this type and size of payday isn’t all that shocking. Yet, to people who follow the Canadian markets, option grants such as these are rare, especially when we take a closer look at the details.

On September 5th, Intact granted its CEO 419,992 stock options with a 10-year term and $276.66 strike price. This is notable for a few reasons:

• Intact rarely gives executives stock options

  • As of recently, Intact has only granted options once when it was coming off the heels of its RSA Insurance Group acquisition in June 2021. Three executives, including the CEO, were provided large stock option grants as a means to “…strengthen retention of key talent, to drive performance, and to align recipients’ interests with those of shareholders over the mid- to long-term…”. The CEO’s grant at the time totaled 406,778 stock options with a strike price of ~$161.

  • This time around, there is no publicly available reason for giving out such a large grant to the CEO.

• The value of the grant is significant relative to the CEO’s typical compensation

  • Depending on the Black-Scholes inputs, this grant could be worth $10-15MM on an accounting basis.

  • Intact’s CEO generally earns: ~$1.4MM salary, ~$3MM bonus, ~$2MM in pension/other, and ~$9MM in a mix of ROE-based PSUs and time-vested RSUs.

  • This one-time grant is nearly equivalent to a year’s worth of his compensation.

• The timing of the grant is different than the typical grant schedule

  • Intact generally provides executives with equity grants in mid/late May but this grant was made 3-4 months later than normal.

• There are high price hurdles for the award to fully vest

  • “25% of the options (104,998) will vest if each of the four specified price hurdles are met prior to September 5th, 2030, being $415.00, $461.11, $507.22, $553.33.”

  • In achieving the lowest and highest hurdle, the options would be worth ~$14.5MM and~$116.2MM, respectively.

Some possible explanations for the grant include:

• Intact’s CEO is extremely bullish on the stock (and future acquisitions) and requested the grant from the board

  • Intact currently trades at ~2.6x book value and ~15x earnings. Relative to other publicly-traded insurers, Intact generally commands a premium market valuation.

  • Over the past 10 years, Intact has deployed $12B on M&A and generated a “~20% average IRR”.

  • Given these facts, it would be hard to argue that the stock and/or the M&A track record aren’t being properly appreciated by investors but it is a possibility.

• The board needed to ensure that they retain the CEO for the long-term

  • Intact’s CEO has held that position since 2008 and has generated significant value through acquisitions. The stock has CAGR’d at ~13% since then, which is incredibly strong.

  • As of the 2024 proxy, his common stock and PSUs currently held are worth ~$150MM.

  • At the ripe age of 54, Intact’s CEO is still relatively young and has many more years to compound shareholder capital.

Retaining a top executive can be an incredibly strong motivator for atypical board behaviour. Given the tremendous amount of value that the CEO has created since he took over, Intact’s board likely felt that they needed to retain him at all costs; what better way to do that than by dangling a hefty options package in front of him.

A grant such as this one looks quite bullish from the outset; however, upon digging deeper, we can conclude that this action likely wasn’t CEO led.

While I can appreciate the nature of the award itself, I think institutional investors should be questioning the board on whether the option package was truly necessary. Would the CEO really have left if he didn’t receive it? Does such a large option grant distort some of his future behaviour?

Guess we’ll find out soon enough.

“♡ Like” this piece if you think ISS and Glass Lewis should give Intact’s board a peepee slap.

On October 6th, Verizon put out a press release announcing that their CEO would be stepping down immediately and that Dan Schulman would be replacing him. Schulman has been a director on the Verizon board since 2018 and details pertaining to Schulman’s compensation were then released on October 14th. Key points include:

• Term through Dec 31, 2027

• $1.5MM in salary

• 250% STIP opportunity

• $9.5MM RSU grant (granted Oct 17, 2025; vests Dec 31, 2026)

• $20MM RSU grant (granted Oct 17, 2025; vests Dec 31, 2027)

• $30MM relative-TSR PSU

  • Earned at a range of 0-200%

    • 50% based on relative-TSR during performance period from Oct 17, 2025 until Dec 31, 2026

    • 50% based on relative-TSR during performance period from Oct 17, 2025 until Dec 31, 2027

• 222,222 supplemental PSUs

  • Earned at a range of 0-300%

    • Based on share price goals ranging from $55-75, with a total of nine separate tranches

    • Based on stock price performance from Oct 17, 2025 until Dec 31, 2028

• In a “CEO succession event”, Schulman gets full vesting of the time-based component of each award

The key points to note about the awards are that all performance periods begin on October 17. In addition, the PSUs and RSUs granted to Schulman represent all of the equity he will receive from now until December 31, 2027. In other words, these awards are front-loaded.

While that is intriguing on its own, two important clues lead me to believe that a spring-load is on the table:

• Verizon is scheduled to announce Q3 earnings (Sep 30th ended) on October 29th. It is highly likely that the compensation committee already had Q3 earnings in hand when they awarded the RSUs and PSUs on October 14th.

• On October 14th, the company also gave their EVP Consumer and their CFO one-time retention RSUs worth $4MM each. These were also granted effective October 17th.

This sets up an interesting situation. Verizon gave a ton of front-loaded awards to its CEO, as well as retention RSUs to other execs, and did so approximately two weeks before it is set to announce earnings. Surely, they wouldn’t give all these equity awards if the stock was set to crater on the earnings release date.

If earnings were truly going to disappoint, then the board would’ve just waited for earnings to be announced and then provided the grants to the executives at a lower stock price. This would actually be more appropriate from a governance standpoint, since proper procedure is to grant equity after earnings are announced.

Lastly, Schulman has been a Verizon director since 2018 and was recently elevated to lead independent director in December 2024. If anyone were to have the information (and the power) to effect a spring-load, it would be him.

“♡ Like” this piece and I’ll give you a big RSU.

PS: Some of you may have noticed that the frequency of my writing has slowed. I have purposely held back some ideas from the blog...more on this to come. (Friendly reminder that I will never put up a paywall.)

One of my subscriber friends (@thewritser on X) recently pointed out an interesting grant at Five Point Homes (NYSE: FPH). What follows is an email reply I sent to him analyzing this particular grant. did the heavy lifting on this one, and what follows builds upon his great insights.

The grants in question were made on September 3, 2025: CEO, CFO, and COO

• Size of the grant: historic RSU grants have been smaller than the ones they just gave (~half as large). Counteracting this is the fact that their stock price was generally lower in those years, so that the total value of the RSU probably isn't that different overall. The CEO minimum payout on the current grant would be ~$2.3MM and the maximum payout would be ~$22.5MM. The CEO's salary is ~$700K with another ~$3MM in equity compensation yearly. The recent proxy shows that he owns ~270K shares outright and holds another ~1.7MM unvested shares overall (some subject to time and some subject to price conditions). Overall, the dollar amount of the grant is quite significant at the higher end of the payout range.

• Wording of the grant: this is the first time that they explicitly call out the share price targets. Previous ones did not disclose the actual share price targets in the Form 4, but they did eventually disclose them in the Def 14A proxy doc. These hurdles are very high and seem to be a stretch goal for management.

• Vesting of the grant: The 20% vesting based on the different share price hurdles is interesting mostly because it doesn't really pay them much if they only reach the lowest hurdle. From a stock price perspective though, that lowest hurdle is a double in the stock price. I'd argue that this grant is almost not worth it to the CEO (for example) if he only hits a couple of the lower price hurdles.

• Vesting of the grant during a change of control: This wasn't disclosed in the Form 4, but historically speaking, this is the wording they've disclosed in the Def 14A: "In the event that a Change in Control occurs prior to the vesting date and the PSUs are not assumed or substituted for in the Change in Control transaction, then the unvested PSUs shall vest immediately prior to the Change in Control at the target level of performance. If the unvested PSUs are assumed or substituted for in such Change in Control transaction, the target level of performance shall be deemed to have been achieved and such PSUs shall vest on the original vesting date. If a Change in Control occurs and an executive’s employment is terminated without Cause or by the participant for Good Reason on or after the effective date of the Change in Control but prior to 24 months following the Change in Control, then any unvested PSUs shall become fully vested at the target level of performance.". This seems to imply that the share price hurdles don't matter if there's a change in control and their awards aren't replaced.

• Timing and characteristics of the grant: It looks as though they've done similar grants in the past, but the threshold premium is much higher this time around. They usually grant them in March, so departing from the typical schedule is a significant tell.

  • Sample of the CEO's grants:

    • March 9, 2023. (Stock was at $2.23)

      • 295,964 time-based RSUs.

      • 394,618 performance-based RSUs. Threshold share price was $3.30 (47% premium) and target share price was $6.30 (182% premium).

    • June 8, 2023. (Stock was at $2.39)

      • 58,670 performance-based RSUs to "replace a portion of a previously granted award that was canceled not for value earlier this year". This is based on other corporate milestones, and I largely ignored this.

    • March 8, 2024. (Stock was at $3.02)

      • 218,543 time-based RSUs.

      • 291,390 performance-based RSUs. Threshold share price of $4.10 (35% premium) and target share price of $7.10 (135% premium).

    • Sep 3, 2025. (Stock was at $5.59)

      • 1,000,000 performance-based RSUs. Price hurdles of $11.50 (105% premium), $14.25 (154% premium), $17.00 (204% premium), $19.75 (253% premium) and $22.50 (302% premium). 20% vesting based on each hurdle met.

• Performance period of the new grant: Kind of odd that it's from Sep 3, 2028 until Sep 3, 2030. Not sure why they would want it to start three years from now. Historically, their performance-based RSUs had a three-year performance period that would start on the date of the grant.

• Mix of the grant: Historically, the CEO's grant has been approximately half time-based RSUs and half performance-based RSUs. This one is 100% performance-based RSUs. That is a bullish change.

• Investor presentation: Given that this is the company’s first investor presentation, I think this is an interesting change. As you pointed out, the presentation seems to be pretty credit focused and likely has to do with their recent debt refinancing.

• 10-Q wording changes:

  

  • These are material additions for sure. My feeling is that these were added because of the Hearthstone transaction, but it may relate to something else.

    

  • The increase was $3.4MM overall. Hearthstone was purchased for ~$56MM. Common real estate acquisition/disposition costs are 1-4% of the purchase price depending on a lot of factors. At an estimated amount of 3% of the purchase price, this would imply ~$1.6MM in selling costs. That leaves almost another ~$1.8MM in "other growth opportunities". If we only take into account the $1.8MM, that would still be a ~15% increase. Definitely significant, especially when they say it's to pursue "other growth opportunities".

• Overall, there's definitely something here. The 10-Q changes seem to imply that they are looking at buying something significant. Usually, I would consider that a negative given that doing good acquisitions is hard. In this case, they wouldn't have granted themselves all this equity just to blow a bunch of money on an acquisition that would crater the stock price 20% tomorrow. Historically, they have achieved the lowest price hurdles in the performance-based RSUs, so why would this grant be any different!

I agree with you. A plausible scenario is them beginning to return capital to shareholders given that the new debt has much less restrictive covenants. This is a lever that is completely in management’s control and would likely result in a significant rerating of the stock price. Land banks, after all, generally trade at a discount because investors tend to think that they won’t return capital for a very long time.

FPH's accounting is complicated, and their ownership of these projects is mostly in GP/LP's, with various participation rights. @marginofdanger on X has put guesses out there of NAV being $10-15 per share. Robotti has said they think it is worth "many multiples" of the ~$4.00 per share it was trading at in Jan 2025 (presentation link).

While it’s possible to narrow it down to a specific number, I don't need a scale to know that someone’s fat.

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PS: I keep conversations with subscribers confidential unless they specifically give me consent to write up an idea. Always happy to take a look at something and provide individual feedback.

Calling an acquisition is incredibly difficult. The hit rate is very low unless there are a ton of signs (aka: Playa Resorts). This is one of those moments when the trail’s pretty faint and the changes leave me wondering what the company had in mind.

Perhaps, UFG Insurance (Nasdaq: UFCS) is considering a sale?

On August 29, UFG Insurance released a Friday 8-K which outlined a new change in control (CiC) agreement for Steven Hernandez, their SVP and Chief HR person. The agreement outlines fairly standard termination benefits that Hernandez would receive in a takeover scenario.

What caught my eye is that Hernandez joined UFG in May 2024 and was the only executive that didn't have a CiC agreement in place. I also found it odd that a Chief HR person (including the lawyer they presumably hired) never requested or negotiated a CiC agreement in the first place, when all other executives already had one.

In the 2025 proxy, UFG went as far as admitting that they knew Hernandez didn't have a CiC agreement in place, but calculated his theoretical CiC payment anyways (see graph and footnote below).

A key question remains: Why did Hernandez get an updated CiC at this point in time?

It's fairly obvious from the above disclosure that this wasn't some oversight from when he was first hired. Had it been that way, they would've fixed the problem when they realized it, and the proxy would contain no such note. That proxy was dated April 8, 2025, so why did they change their mind on the matter a mere four months later?

Maybe the board was reviewing the CiC agreements (out of cycle) because they’re anticipating an acquisition offer…

UFG's share price has been in a holding pattern at ~$30 per share since the Covid-19 pandemic hit. This kind of complacent market performance would definitely ratchet up some pressure on the executive team. Fortunately for them, there is a staggered board structure and a large shareholder that drives the bus. Among the large index fund holders, the McIntyre Foundation holds ~12% of the shares, and is the 2nd largest shareholder behind BlackRock.

The McIntyre Foundation was originally set up in 2009 after the passing of Scott McIntyre, the son of UFG founder John McIntyre. The foundation has a long-time board member, Christopher Drahozal, who has also sat on UFG’s board since 1999. In addition, UFG brought in two board members in 2022 with private equity backgrounds, which could be helpful in running a sale process.

UFG's current CEO was hired in August 2022, with 30+ years of experience, most recently as the COO of CNA Commercial (tied to Loews Corp), and Global Manager for Chubb Commercial. Oddly enough, Hernandez has near 100% resume overlap with UFG's CEO, spending significant time at both CNA and Chubb. Could UFG's CEO be looking out for his pal Hernandez by giving him a new CiC agreement before an acquisition goes through?

Sure, there’s a fair bit of speculation here — but that’s half the fun, right?

PS: On the August 7th Howard Hughes call, Bill Ackman clarified that they would pursue an insurance company acquisition in the $1B range, and expected to announce a transaction “in the fall”. UFG amended the CiC agreement approximately one week later, which seems like too close of a coincidence to me.

As of today, UFG has a market cap of ~$800MM, and a standard 20% deal premium would put it just short of $1B. Only time will tell if Howard Hughes is the ultimate bidder.

The dad in question promoted his son to CEO and granted him a ton of performance-based RSUs based on an aggressive stock price target. This definitely raises an eyebrow but I find the timing of the grant even more peculiar.

Customers Bancorp Inc. (CUBI), formerly known as New Century Bank, was started in 2009 when Jay Sidhu helped recapitalize the bank coming out of the GFC. Jay had previously been the CEO of Sovereign Bank and grew CUBI through traditional acquisitions, as well as acquiring banks directly from the FDIC.

Jay’s history is not without controversy, as one can see in the slide deck that Relational Investors put out in 2006 during his time at Sovereign Bank. Many of the problems stemmed from shortfalls in corporate governance, as well as related-party transactions. I’m curious if has any insight here given that he was working at Relational around this time.

While a history of governance issues isn’t something to get excited about, I think that Jay’s background and willingness to push the limits is informative of what he’s likely to do in the future. At the end of the day, people don’t really change.

Jay owns and controls ~6% of CUBI today, but his influence over the board likely eclipses this percentage by a significant amount. For example, Daniel Rothermel was the lead director at Sovereign Bank and is currently the lead director at CUBI, in addition to sitting on the compensation committee. The board has a staggered structure in place and recent changes cement Jay’s power over the board.

On July 25, 2025, CUBI announced that Jay is transitioning to executive chairman, while his son Sam will succeed him as CEO. To be fair, Sam has been CEO of Customers Bank since July 2021 (Customers Bank is the wholly owned operating subsidiary of CUBI).

Per the press release, this transition is set to occur on January 1, 2026 and Sam received a large equity grant in connection with his appointment.

What caught my eye is that Sam was given this large grant on July 23, 2025 (per the Form 4), but his appointment isn’t effective until January 1, 2026. Five months of timing difference is a bit peculiar.

The composition of Sam’s one-time equity grant was also intriguing:

• 225,000 performance-based RSUs

• Vest upon two hurdles:

  • $125 stock price hurdle during the performance period starting January 1, 2026, continuing five years thereafter

  • Time vesting condition if he is employed as of January 1, 2031

• If the incentive award vests, a two-year holding period will apply

• During the first three years of the performance period, Sam will not be entitled to receive any one-time grants outside of regular, annual STIP and LTIP grants

This grant sticks out to me for a few reasons:

• CUBI stock traded at $62.55 on the grant date, which would require a doubling of the stock price over the next five years to achieve the price hurdle of $125

• If achieved, the award is worth ~$28MM based on a stock price of $125

  • CUBI’s CEO has typically been paid ~$1MM in salary and ~$2MM in equity awards. This one-time grant is very large.

• The grant isn’t being given on January 1, 2026, the start date for the performance period. It’s being given on the date of the announcement, five months earlier.

• CUBI has never awarded a grant with a stock price hurdle, other than this.

  • The company’s performance-based RSUs are typically based on return on equity, relative TSR, and average non-performing assets.

As a new father myself, I don’t understand why he’d set the bar so high on his son. Jay (the father) has a history of bending the rules from a governance perspective, so why not do the same with your son’s equity award.

As of today, CUBI trades at ~1.1x book value, and has typically earned a ~10% return on equity. Today’s most recent book value of ~$56 compounded at 10% per annum for the next five years would result in a future tangible book value of ~$90. Assuming all else is constant, CUBI would then need to trade at ~1.4x book value for the performance-based RSUs to pay off.

Is this a case of a father making things overly difficult for his son, or does he simply want it to appear that way knowing that blue skies are ahead?

“♡ Like” this piece if your dad didn’t give you 1-foot hurdles.

It’s hard to paint a darker picture for UnitedHealthcare in the past couple of months.

• April 17: Missed earnings and suspends guidance

• May 12: CEO steps down

• May 14: WSJ reports a criminal investigation into the company

• May 21: Article from The Guardian describing secret nursing home payments

• July 9: Article from the WSJ criticizing Medicare billing practices

• Etc.

From the date of the original earnings miss, United stock fell from $585 to $300. You don’t typically see this kind of drawdown in a former compounder.

Many have put United stock in the “too hard” pile at this point. The business (and the overall US healthcare system) is incredibly complicated to understand, and I have absolutely zero value-add as a Canadian. Fortunately, there are some compensation decisions that I feel compelled to flag.

When United’s former CEO stepped down on May 12, the board immediately appointed Steve Hemsley, Chair of the Board, to take over as CEO. His compensation included the following: $1MM base salary, no annual bonus, and a one-time $60MM equity award comprised purely of stock options.

Here are some details pertaining to the stock options:

• 602,777 options

• $308.01 exercise price

• 10-year term

• Cliff-vest after 3 years

• No other equity awards for Hemsley for the next 3 years

• If a termination without cause or for good reason occurs during the first year of his employment, he will receive a full year of service credit

• Severance benefits include two times his annual base salary, and continued vesting of options during a 24-month severance period

For comparison, United’s former CEO compensation was typically: $1.5MM of salary, no bonus, $5MM in options, $5MM in RSUs and $15MM in PSUs.

I find the new CEO’s compensation particularly interesting for the following reasons:

• Hemsley is arguably one of the most knowledgeable insiders. He was the company’s CEO from 2006-2017 and chair of the board from 2017 until present day.

  • Nobody is more equipped to know what is going inside and outside the company than him.

  • He is risking a significant amount of reputation by coming back as the CEO.

• Hemsley would have had a hand in forming his compensation structure. He did not request any RSUs or PSUs, only stock options.

  • He also negotiated a front-loading of his stock options, which is typically a very bullish sign.

• If United stock returns to $585, the options could be worth +$167MM

• My understanding is that the stock options essentially vest even if Hemsley is terminated or resigns before he completes three years of service.

  • He would get a full year of service credit, in addition to continued vesting during the 24-month severance period.

• Hemsley bought ~$25MM of United stock on the open market at $288 on May 16, 2025

  • His form 4 shows that he owns ~1.1MM United shares worth ~$330MM

• United’s President/CFO also bought ~$5MM of United stock on the same day

There’s a lot of hair on this one, but insider moves suggest that things aren’t all that bad. Maybe even bullish…

Let’s dive in.

On March 1, 2025, AutoNation gave its CEO, Michael Manley, a special, one-time performance-based RSU award up to a maximum of 134,365 shares (threshold performance would result in a payout of 26,873 shares). With AutoNation shares trading at ~$182 on the grant date, this represented a payout well in excess of $25MM at the high end.

The award is based on absolute stockholder return during a 5-year period, in addition to continued service requirements. The RSUs cliff-vest following the performance period, and will be forfeited if Manley retires or voluntarily resigns without “good reason” during this time.

Unfortunately, no other details were provided. The company also mentioned that they “will include additional discussion of the One-Time PSU Award in next year’s Compensation Discussion and Analysis.”

As I examine the grant, a few thoughts come to mind:

• AutoNation’s stock price today is essentially unchanged from the grant-date stock price, which means that we haven’t missed out.

  • The grant was also provided at a time when the stock was only ~9% away from its previous all-time high. Either the grant was made because they see continued upside, or the grant was random and completely uninformed. The former seems more likely.

• The grant was awarded on March 1, which is typically when AutoNation executives receive their yearly grants. This is ~2 weeks after their full-year results were released, which suggests that they aren’t playing with the timing of the award.

• The stock price hurdles of the award are not disclosed, and may not even be disclosed in next year’s proxy.

  • This is unfortunate, but one could assign arbitrary performance bands to run a mock scenario analysis.

    • “Threshold” performance would likely be a 5% CAGR. If this was the case, the stock would need to reach ~$232 by the end of the 5-year period, and the PSUs would be worth ~$6MM.

      • Manley typically receives ~$7-10MM of stock compensation per year, so this wouldn’t really be a “win”.

    • “Maximum” performance would likely be a +15% CAGR. If this was the case, the stock would need to reach ~$366 by the end of the 5-year period, and the PSUs would be worth ~$49MM.

      • Even if my hurdle rate isn’t exactly correct, the size of the dangling carrot is very large in gross dollar terms.

• The accounting value for the award is $15MM.

  • Manley’s total yearly stock compensation is $7-10MM, which is significantly less than this award.

• Most recently, AutoNation executive stock awards comprised 40% RSUs, 30% relative-TSR RSUs, and 30% ROIC RSUs.

  • The granting of an award based on absolute stock price performance over a 5-year period is a significant change from the past. I haven’t found an instance where AutoNation has done this before.

  • Per the Form 4 disclosure on March 4, 2025, it looks as though Manley still received his yearly RSU grant worth ~$4.6MM.

• Manley has been at AutoNation since September 2021 and has collected $13-15MM per year in total compensation.

  • He currently holds ~100K shares of stock worth ~$20MM, in addition to another +$25MM of unvested equity awards.

  • At the mid to upper end value, this new award could be quite large relative to his current equity.

As for the business itself, AutoNation trades at ~9-11x forward P/E, and their strategy of heavy share repurchases is a consistent and stated capital allocation decision going forward. It doesn’t take heroic assumptions to pencil out a +10% CAGR in the stock as of today, assuming earnings stay constant.

While details of the grant are limited, the structure of the award suggests that investors should revise their probability models accordingly. In this case, I think it would be wise to bet alongside Manley.

Over the past few months, I’ve reviewed most of the proxies filed by TSX listed companies. I came across quite a few disclosures that weren’t worthy of a long-form post, but were interesting, nonetheless. Here’s a recap of some top finds:

Quebecor

• President and CEO, Pierre Peladeau, was given 4MM stock options on April 12, 2024. The grant was in recognition of him doing the jobs of multiple executives.

• The grant timing was normal, but the 4MM amount was not. Historically, Peladeau only received 200-400K stock options per year.

  • The option strike price is $29.82, and Quebecor stock currently trades at $39.72.

• In addition, Peladeau can now elect annually whether to take his salary in the form of cash or stock options.

  • He chose to receive the rest of his 2024 salary in stock options.

• This is a rare bullish signal in an industry that investors have mostly turned their back on.

Dentalcorp

• The company made an amendment to their Legacy Option Plan which allows stock option holders to surrender their options in exchange for shares.

• It appears that most of the options underlying the legacy plans have exercise prices from $10-18, and expiration dates from 2028-2031.

  • The stock price today is $8.57, so most (if not all) are out-of-the-money

• The exchange formula itself is needlessly complicated.

• I don’t know why the company would do this, given most of the options are currently underwater and cannot be exchanged.

Aurinia Pharmaceuticals

• Redesigned their LTIP from 50% RSUs and 50% PSUs, to 50% options and 50% PSUs.

  • The old PSUs depended on hitting revenue targets, but the new ones depend on hitting progressively higher share prices (undisclosed).

• The awards were granted at the start of March 2025, which is in line with historical timing.

• Size wise, the CEO received 443,973 options and 290,728 PSUs.

  • The current share price is US$8.09.

• The company delisted their shares from the TSX in July 2021, but still reports to SEDAR for some reason. Maybe because they are headquartered in Edmonton, AB.

• A large holder/director continues to buy shares aggressively on the open market, and the company recently bought back quite a bit of stock.

Peyto Exploration

• Replaced its stock option plan with a TSRRP (Total Shareholder Return Rights Plan).

  • Essentially, the plan is a total shareholder return (TSR) plan which considers dividends paid throughout the period.

• Peyto says that their previous stock option plan only considered share price increases, and not dividend payments. That is the main reason for implementing the new plan.

• For executive officers, 50% of their TSRRP’s are subject to performance conditions:

  • If the total shareholder return is greater than or equal to 8% per year, then full vesting occurs.

  • Anything below 8% results in no vesting.

• The vesting schedule seems overly complicated to me. Peyto provides examples of how it’s calculated in the circular, so feel free to take a look.

Cineplex

• Added ROIC and EPS growth metrics to their PSU grants going forward.

  • It will continue to include a relative TSR component, which was the only measure in the previous version.

• Added some language to their Change of Control benefits (in blue).

Lundin Mining

• Executive compensation previously comprised 25% options, 50% PSUs, and 25% RSUs. Going forward it will be 50% options and 50% PSUs.

  • The PSUs continue to be based on 3-year relative TSR.

• Lundin’s CEO requested more equity incentives; therefore, the board amended his target to 300% of base salary (previously 240%). See below.

Enerflex

• The company did a significant overhaul of their proxy filing.

  • I’m not sure if this is defensive or in response to activist pressure behind the scenes.

• The CEO stepped down in March 2025, and multiple board members are “retiring”.

• The main items added to the proxy are:

  • Strict 12-year term limits for board members.

  • Enhanced succession planning.

  • Discussions about proactive shareholder engagement.

• STIP metrics were changed to include Net Income, SG&A, and Free Cash Flow.

  • The STIP will continue to have a Safety component, but EBITDA, EBITDA %, and Net Debt metrics have been removed.

• The company entered into employment agreements with each of its executives, as a matter of “good governance”.

Aya Gold & Silver

• Top members of senior management were granted a retention focused option package on August 23, 2024.

• The exercise price is US$10.87, and the current stock price is CAD$14.45.

  • According to SEDI, the exercise price quoted in Canadian dollars is C$15.63.

• The CEO was granted 1MM options, and other members were granted 500-750k options.

  • Executives have rarely been granted options historically, and these recent grants are reasonably large in size.

MAG Silver Corp

• The company updated all of the employment agreements with each NEO as of January 1, 2025. Changes include:

  • Termination without cause payments were increased by 3-6 months base salary, plus prorated bonus.

  • Change of control protection periods were increased by 6-9 months.

Verticalscope Holdings

• On October 17, 2024, the company granted 500k PSUs to its Founder/CEO, which are based on stock price targets.

  • The specific vesting tranches were not disclosed, but the share price milestones range from C$6-25. The stock currently trades at $3.95.

  • The milestones must be reached within the first 48 months following the grant, which is incredibly quick.

  • Historically, the CEO has only earned ~$1MM in total compensation, so this PSU grant is relatively large for him.

• Oddly enough, this PSU was not reported in the SEDI database.

Westaim Corporation

• Entered into a private placement and PSU grant on April 3, 2025 with its now largest shareholder. The shares were bought at an implied price of $28.50, and there are additional warrants attached, which only vest once the shares reach $48.00.

  • The placement also includes an investor rights agreement which allows the shareholder to nominate an additional board member if the $48.00 target price is met before April 3, 2030.

    • I have never seen a clause like this before.

  • The PSU grant is for 673,727 shares, and only vests if the same $48.00 target price is achieved. The value of these PSUs is significant if achieved.

• As of today Westaim shares trade at $31.66.

Without doing an in-depth analysis of each situation, it’s impossible to tell if there are any smoking guns. If anyone follows these companies closely and can provide some additional insights to piece the puzzle together, it’d be greatly appreciated.

The Board of BRP Inc. recently put forward a resolution to exchange a bunch of out-of-the-money options held by employees and replace them with special Restricted Stock Units (RSUs). This is a move not commonly made, since it has some similarities to the options repricing that occurred in in the late 1990’s.

ISS, Glass Lewis, and institutional shareholders won’t be happy with this move but shareholders must go along with it because BRP is largely controlled by Bain and the founding Bombardier family.

BRP’s board is knowingly using some of its political capital by doing this, so you can be damn sure that they’ve thought this through.

On April 23, 2025, BRP released its 2025 proxy which outlined a proposed resolution that caught my eye. The stated purpose of the proposal is to ensure the ongoing retention of executives and employees of the company, given that many of the stock options issued to them in 2021, 2022 and 2023 are now significantly out-of-the-money. With BRP trading at ~$53 per share today, a sample of the historical option grants below makes their case.

Here are the pertinent details of the planned exchange:

• Exchange out-of-the-money stock options for RSUs

• Voluntarily forfeit 70% of all 2021-2023 options

• The eligible options consist of a total of up to 680,505 stock options and have exercise prices ranging from $88 to $123

  • 264,300 eligible options (representing 38.8% of all eligible options) are held by 13 insiders of the corporation

• BRP’s CEO is not eligible to participate in the exchange

• Up to 272,202 special RSUs are proposed to be granted, which represents one special RSU for each 2.5 eligible options

• The RSUs are to be cash-settled and will vest during specified periods ending no later than December 31, 2028

Here’s the math on what that the grant looks like at different prices:

• $53 per share (current price)

  • 680,505 options: worthless, other than time value

    • If you want to get technical, a Black-Scholes estimate would peg the value reasonably high given the 7 years to maturity and high implied volatility.

  • 272,202 RSUs: ~$14.4MM

• $25 per share

  • 680,505 options: worthless, other than time value (same caveat)

  • 272,202 RSUs: ~$6.8MM

• $100 per share

  • 680,505 options: breakeven plus time value (same caveat)

  • 272,202 RSUs: ~$27.2MM

From an employee perspective, RSUs are generally preferred given they have value in all scenarios, are easy to understand, and don’t need heroic increases in the share price to be in-the-money. While the options do have mathematical value, regular employees tend to not ascribe much value to options when they are deep out-of-the-money. At the end of the day, it’s all about perceived value from the employee perspective.

The RSUs granted to the 13 insiders equate to ~$5.6MM of value at today’s stock price, or ~$431K per employee. I would estimate that the median BRP insider probably makes ~$250K per year, which makes this grant reasonably significant, especially if one also believes that the stock is currently inexpensive.

BRP is admittedly the ultimate consumer discretionary company. The Sea-Doos, Ski-Doos, and Can-Am ATVs it manufactures are large purchases that can be deferred (or accelerated) based on current and perceived future wealth; therefore, valuation should be based on mid-cycle revenues and margins. I estimate mid-cycle revenue and EBIT margins for BRP to be $6.5B and 9%, respectively. This results in $585MM of EBIT, which seems fair given that maintenance capex and amortization generally equal each other. Readers can pull historical financials to determine whether I’ve been too conservative or aggressive with those assumptions.

On an EV/EBIT basis, I estimate BRP to be trading at ~11x (~15x based on EV/NOPAT). There is a high (but manageable) debt load here, so beware the use of levered multiples. For a company that has multiple market-leading franchise brands, can invest more in R&D relative to competitors, and can grow earnings into the future, I believe that is a reasonable price to pay.

The key questions that I come back to are: Who decided on the option exchange? Why are they doing the exchange now? And is the exchange informed by valuation?

BRP has two classes of shares:

• 34,512,676 subordinate voting shares with 1 vote each

• 38,519,358 multiple voting shares with 6 votes each

As I alluded to earlier, Bain and the Bombardier family (now Beaudier) effectively control the company. There is a nomination rights agreement in place whereby Bain, Beaudier Group, and CDPQ are entitled to designate three, three and one member(s) of the board, respectively. Bain has elected to only nominate two directors to the board, one of which sits on the compensation committee.

Bain has been involved with BRP since 2003 and have been opportunistically selling down their stake in secondary offerings or selling into large share buybacks. More recently, Bain did a bought deal secondary offering in April 2024 for 1.5MM shares (~11% of their stake) at $92.90 per share. This provides a decent estimate of where sophisticated insiders see valuation. Overall, Bain’s private equity history would lead me to believe that they could have had a part in orchestrating this exchange.

While Bain and others are the ultimate decision makers at the board level, one must wonder what the impetus is for doing the option exchange. After all, this decision doesn’t set the standard for good corporate governance.

What we do know is boards do not routinely exchange options for RSUs. This is an active decision by the board, which would need to be disclosed on the main page of the proxy. We also know that there’s no requirement to action the exchange during any specific time of the year.

The board actively chose to approve it on March 25, 2025, subject to approval by shareholders. On March 25, BRP stock was trading at ~$50 per share, a low not seen since the depths of the covid pandemic.

Secondly, one could argue that a firm-wide special retention grant is the exact opposite of what a public company would want to do during a cyclical downturn. Why not let natural attrition work to your advantage instead of having to lay people off during the downturn.

There are really only a few reasons to do this:

• The special RSU grant was actually conceived to retain key personnel since the company wants to come out of the downturn stronger than before.

  • For truly long-term shareholders, this should be seen as a positive, given that competitors may not be doing the same.

• The special RSU grant occurred because a large group of key employees complained about their compensation.

  • Employees that receive stock options and RSUs tend to be in mid/upper management and have decent pay. I find it unlikely that people would overly complain about compensation, especially during a downturn with industry-wide layoffs on the table.

Bottom line: the board is using up some of its political capital to undertake the option exchange. If they grant these special RSUs and the stock price goes down another 50%, then there’s not much of a point in doing so. If they grant the RSUs and the stock price increases 50%, then that has substantially more firm-wide retentive value. Timing is reasonably important.

With the stock currently trading at a reasonable valuation, I think a long-term position in BRP is warranted given its business quality. The decision by the board to approve the option exchange when the stock was at ~$50 suggests they see little long-term downside at that price.

PS: BRP has disclosed that they have limited exposure to products affected by tariffs and has doubled down on powersports by selling its loss-making aluminum boat segment.

Why are the changes being made now, and who’s really calling the shots?

In a classic case of a Friday night dump, Howard Hughes put out an after-hours 8-K on April 4, 2025 which outlined employment agreement changes for the company’s CEO, CFO, and General Counsel. Here’s a recap of the major events leading up to the filing:

• July 18, 2023: Howard Hughes reorganizes into a holding company structure

• April 4, 2024: Bill Ackman retires from the board. Existing director, Scot Sellers, replaces him as Chairman. Ben Hakim, President of Pershing Square, joins the board in Ackman’s place.

• August 1, 2024: Howard Hughes spins off Seaport Entertainment Group (NYSEAMERICAN: SEG)

• August 8, 2024: Pershing Square looks to take Howard Hughes private, and Howard Hughes forms a special committee to evaluate offers.

• January 13, 2025: Pershing offers $85 per share, with the caveat that Howard Hughes stays public and Pershing owns +60% of the shares. It would seek to become a “diversified holding company” going forward.

• February 18, 2025: Howard Hughes confirms it received a revised proposal. Pershing would buy new shares at $90, and would claim a 1.5% management fee for “managing and investing” the new holding company’s investments.

• March 3, 2025: Howard Hughes’ special committee rebuffs Pershing’s offer and enters into a standstill agreement set to expire March 13, 2025.

• March 12, 2025: Howard Hughes extends the standstill period to April 7, 2025

• April 4, 2025: Howard Hughes discloses it amended the employment agreements of it’s CEO, CFO, and General Counsel. This was filed as an 8-K but not a press release.

• April 7, 2025: Howard Hughes extends the standstill period to April 15, 2025

• April 14, 2025: Howard Hughes extends the standstill period to April 30, 2025

• April 30, 2025: Howard Hughes extends the standstill period to May 30, 2025

Given Howard Hughes’ CEO is the only executive that holds a board seat, I decided to focus primarily on the changes to his agreement:

• Extends his employment agreement to December 31, 2028.

  • His agreement was originally set to expire on December 1, 2025, which is more than 7 months away.

  • Generally, there’s no need to renew an agreement this early. A few months before expiry would have sufficed.

• LTIP compensation doubled from $2.25MM to $4.5MM.

  • The grant mix hasn’t changed (50/50 RSUs and PSUs), but the time vesting on the RSUs decreased from 5 years to 3 years. The PSUs are still based on NAV growth per share targets.

  • This is a reasonably significant increase given that the CEO has a salary of ~$1MM and STIP bonus of ~$2MM.

• The “good reason” definition was amended to add a clause that includes a material diminution of duties if the company goes private or becomes a subsidiary.

  • If the CEO ceases serving as an executive within 24 months of a change of control, due to a take-private or being transferred to a subsidiary, he can terminate his employment agreement for good reason.

  • This “good reason” termination allows him to collect additional payouts, but the company has 30 days to remedy the situation.

• Increased the protection period during a change of control from 12 months to 24 months.

  • If the executive were to be terminated within 24 months of a change of control period, they can receive specified payouts. Extending this protection period gives the executive more protection.

• Added a “transaction” definition to the agreement.

  • This is specifically defined as anyone owning +40% of the shares, following the occurrence of a specified event.

  • Given that Pershing currently owns ~37.4% of Howard Hughes, the 40% ownership threshold would be triggered by any of their proposed offers.

The CFO and General Counsel’s amendments are also quite similar, but do not include an increase to their LTIP.

Overall, these changes favour the Howard Hughes executives and help mitigate the uncertainty of the events currently occurring with the Pershing acquisition offers.

While I want to believe that the rationale for the changes is as straightforward as the Board wanting to reassure the executives, I’m not entirely convinced that that’s the case.

The changes to the employment agreements seem to have been done at an odd time. Why make changes in the midst of a standstill agreement? If an acquisition was on the table back in late 2024/early 2025, why not make the amendments at that point? None of the agreements were set to expire anytime soon, so why extend them now?

To understand the dynamics at play here, let’s take a look at the individuals who make compensation/employment decisions at the board level. The compensation committee comprises:

• Scot Sellers (Chairman of the board; Chairman of the compensation committee)

  • Independent director since November 2010

  • Sat on the compensation committee since the original IPO

  • Chairman of the compensation committee since the 2016 proxy

• Mary Ann Tighe

  • Independent director since October 2011

  • Sat on the compensation committee since the 2013 proxy

• Adam Flatto

  • Independent director since November 2010

  • Most recent addition to the compensation committee in the 2023 proxy

  • His firm, Georgetown Company, partnered with Ackman (and other investors) in 2015 on a commercial property development

  • His wife is President of the Pershing Square Foundation, Bill Ackman’s philanthropic arm.

Bill Ackman used to sit on the compensation committee before he retired from the Board, so it’s safe to say that he has strong relationships with each of these directors. It’s also a fair to conclude that Scot Sellers is the most powerful person on the Howard Hughes board, given he is Chairman of the compensation committee and Chairman of the board.

As I looked through all of the press releases pertaining to the Special Committee and the Pershing acquisition offers, I couldn’t find who comprises the members of the Special Committee itself. On the February 27, 2025 earnings call, John Kim from BMO also posed the question.

This was a classic non-answer. The company discloses who it’s using as advisors, but not who sits on the special committee itself. If I were to speculate, I would bet money that Scot Sellers has a key role.

Sellers is one of the longest-tenured directors on the Howard Hughes board, and I think it’s safe to say that Pershing more than likes him, given he replaced Ackman as Chairman of the board after he stepped down. Ackman had held the Board Chairman title since the IPO, so the passing of the baton is a significant signal.

This is where I delve into informed speculation.

• Do Ackman and Sellers have too close of a relationship? Probably.

• Would Sellers continue to serve on the Howard Hughes board if Pershing was successful in buying a majority stake, taking it private, or turning it into a holding company? Probably.

• If Sellers is on the Special Committee and he rebuffs a few “crappier” offers from Pershing but accepts a “less crappy” offer, does that give him plausible deniability and allow him to fulfill his fiduciary duty as a director? Probably.

• Does the significant increase in LTIP to Howard Hughes’ CEO help him “buy into” an acquisition offer, given he holds one of eleven board seats? Probably.

Without having access to closed-door conversations, it’s hard to put my finger on the exact dynamics at play.

Something smells off.

“Shit-show” is how I would sum up the corporate governance developments at Gildan Activewear over the past year and a half. To make a long story short, the previous board randomly fired Gildan’s Founder/CEO, Glenn Chamandy, and replaced him with someone objectively incompetent. Not surprisingly, many large shareholders were caught off guard given that Chamandy had an impeccable record of compounding value at 19.7% per annum, totaling nearly 99x since the IPO.

Following his firing, a shareholder group led by Browning West and Chamandy joined forces and ran a successful proxy contest in May 2024, which resulted in Chamandy being reinstated as CEO, and the incumbent board being fired.

As I followed along with the proxy contest in 2024, one of Browning’s campaign items stood out to me. It specifically rested upon implementing an incentive plan to reach a share price of US$100 by December 2028. This was significant because during the time of the campaign, Gildan stock traded at US$35.

On March 18, 2025, Gildan finally released their proxy which provided some details on this new incentive plan. They call it the “Special Aspirational Incentive Plan (AIP)”, and it was approved and adopted by the board on December 12, 2024.

• Below are the headline goals for the PSUs:

• The share price targets must be met before December 11, 2028, with a fifth-year extension period ending on December 11, 2029, subject to payout adjustments.

  • In cases where share price hurdles are not met by the end of the four-year period, plan participants can benefit from an extension year (the fifth year). There’s a lot of detail pertaining to the extension year, but at a high level, the max payout is reduced by 10-15% if it runs into the 5th year.

• There is no payout prior to the end of the fourth year even if the share price hurdles are achieved prior to that.

  • The payout is capped at 50% of the award value at the end of the fourth year, with the remaining amount paid out, if any, at the end of the fifth year

• The PSUs were given to Chamandy, senior executive officers, as well as ~200 leaders across the organization, in all business segments and countries where Gildan operates.

• The amount of PSUs specifically given to the named executive officers are outlined in the far right column below:

• While the fair value of the awards are estimated using accounting conventions, I find it easier to do a payout scenario analysis. Let’s take Ward (President, Sales, Marketing, and Distribution) and Chamandy (CEO) as examples:

• If the minimum price hurdle of US$75 is met:

  • Ward receives US$0.8MM

  • Chamandy receives US$4.4MM

• If the maximum price hurdle of US$100 is met:

  • Ward receives US$11.1MM

  • Chamandy receives US$59.9MM

In a normal year, Ward and Chamandy take home ~US$2.7MM and ~US$10MM, respectively, which includes salary, STIP, options, LTIP, etc. Per the proxy, Ward and Chamandy also own 245K and 1.4MM shares, respectively, of stock, unvested RSUs, and unvested PSUs. This special PSU is quite significant at the high end in terms of dollar amount, as well as number of shares for both executives.

The key question is: should we bet alongside them?

We have some clues based on the slides from the 2024 Browning proxy contest playbook.

• The revenue growth estimate results in a ~6% CAGR during the performance period.

  • Revenues grew 2.3% in F2024, and overall revenue growth has been quite tepid post-pandemic.

  • I consider the 6% CAGR a bit too optimistic, and would expect a more normalized 2-3% CAGR.

• The adjusted operating margin is assumed to increase to 22.4%, mostly due to cost improvements, a reversal of cotton price headwinds, and a shift in product mix.

  • Historical adjusted operating margins at Gildan have been: 0.9% in F2020, 20.2% in F2021, 19.7% in F2022, 17.3% in F2023, and 21.3% in F2024.

  • This margin goal seems quite achievable, especially when one considers their new low-cost Bangladesh production facility.

• The shares outstanding are assumed to decrease to 113MM, as a result of an aggressive buyback program.

  • This variable is completely in the board’s control, and also happens to be the largest contributor in the EPS bridge above. As of F2024, there are currently 163.1MM shares outstanding, which was a 7.4% reduction relative to F2023.

  • One of the new board members is the Co-Founder of Browning himself, Peter Lee. I expect Browning to advocate that all excess cash flow be diverted towards share buybacks.

• F2024 diluted EPS was $3.00 (after adding back legal fees and severance pertaining to the proxy contest)

Today, Gildan trades at US$45 per share and has leverage of ~1.9x Net Debt/EBITDA. Due to the recent sell-off related to tariff uncertainty, investors are able to purchase this quality company at 15x LTM earnings.

The entirety of Gildan is heavily incentivized to achieve those share price goals. Time to get long too.

On March 3, 2025, the company under discussion approved an amendment and restatement of their change of control agreements with their CEO and CFO. After comparing the new and the old agreements, three changes were made:

1. For the “Good Reason” clause, they changed the office distance from 50 miles to 25 miles.

   1. This relates to change of control (CoC) situations where an executive can terminate their employment for “good reason” if their new office is located more than 25 miles away. A “good reason” termination is important as it entitles an executive to additional payouts.

   2. There would be no reason to change the distance in this clause unless you were specifically expecting a CoC to occur. I suspect that it isn’t a coincidence that the only city near this company’s headquarters is the core business district in Houston, which is exactly 26 miles away.

2. The “Target Bonus” is now specifically defined in the agreement. It is equal to 100% and 80% of the salary for the CEO and CFO, respectively.

   1. This term was used quite often throughout the old agreement, but it was never officially defined. The “Target Bonus” specifically applies in determining executive payouts during CoC situations.

   2. In my opinion, a lawyer must have been reviewing this agreement recently and realized that the term used in the old agreement was open to interpretation.

3. All equity-based incentives given after Jan 1, 2025 become fully-vested under a CoC situation.

   1. This clause was added into the most recent CoC agreement and applies to CoC situations where an executive terminates their employment for “good reason”.

   2. Again, this is an odd change to make unless you are expecting a change of control.

What if I also told you that the compensation committee chair is a portfolio manager at Kokino LLC, which provides investment management services to Piton Capital Partners. Piton/Kokino own ~11% of the shares outstanding and have been shareholders since late 2017. Piton filed a 13D in March 2018 seeking to effect change at the board-level, and later entered into a cooperation agreement with the company in November 2018. Throughout the following years, Piton made changes to the board and the C-suite, in addition to selling non-core assets and winding down certain business lines.

In 2020, the company embarked on a “transformation” program which sought to increase the business’ quality. It previously had high customer concentration, majority fixed-price contracts, large warranty obligations on ships it had built, and litigation issues. Many people, myself included, would have deemed this company completely un-investable.

Today’s picture is slightly better. There are more cost-plus contracts, less reliance on offshore oil & gas contracts, the ship-building warranty periods have mostly expired, and they’ve settled the litigation overhang. The company has a market cap of ~$106MM, ~$30MM of excess cash on the balance sheet, and ~$9MM in LTM EBIT. I would caution against using LTM EBIT as a measure though, given the company’s historical track record of losses. There’s a reason why they have ~$121MM of historical net operating loss carryforwards.

Given the amendments to the change of control agreements, I believe that the company is preparing to put itself up for sale. The changes to the agreements are so oddly specific, that it would be very hard to imagine any other reason for making them. In addition, Piton has been invested in the company for over seven years now, and it seems logical to me that they would eventually seek an exit. It’s safe to say that this investment hasn’t been very fruitful for Piton. The stock currently stands at $6.68 per share, and I estimate that Piton’s cost basis is ~$9-10 per share.

Timing-wise, I suspect that the CEO/CFO would want to receive their annual equity grants before starting a sale process. This is especially because the ones granted after Jan 1, 2025 fully-vest under a change of control situation for “good reason”.

Historically, the company has granted yearly equity anytime from late February to late May, and EDGAR has yet to show any grants in 2025. If my interpretation of a sale is correct, then I would anticipate the official sale process to kick-off soon after the 2025 grants hit the tape.

The company in question? Gulf Island Fabrication Inc. (NASDAQ: GIFI). Let’s see what happens.