San Antonio Express-News (Sunday)
Opportunity seen.
Leaders at local companies snap up shares, see opportunity in downturn
Despite the recent stock market volatility triggered by the coronavirus crisis, local entrepreneur Graham Weston is bullish on the prospects for Frost Bank’s parent company.
Weston, co-founder of cloud computing company Rackspace, earlier this month spent $2 million to acquire 29,400 shares of San Antonio-based Cullen/Frost Bankers Inc.
“Frost has the strongest banking franchise in Texas,” Weston said in an email Friday. “The stock seldom is sold at a discount!”
Weston, a member of Cullen/ Frost’s board since 2017, joins insiders at other local companies who have taken advantage of the market downturn to load up on stock over the past couple of months. They include NuStar Energy LP Chairman William Greehey and Usio Inc. CEO Louis Hoch.
Weston’s involvement with Cullen/Frost represents a uniting of new and old San Antonio-area money, of sorts.
He previously made the Forbes billionaires list thanks to the fortune he built at Rackspace before it was sold for $4.3 billion to New York private equity firm Apollo Global Management in 2016. Cullen/Frost, where Weston, 56, serves as the youngest director, is the holding company for Frost Bank, a 153-year-old institution.
Prior to Weston joining Cullen/ Frost’s board, his Weston Urban entered into a deal to build the bank’s $142 million headquarters building. He is the managing
member of the building owner’s general partner. He holds a 21 percent indirect ownership interest.
The partnership collected almost $5 million in rent from Frost last year. Those payments will approach almost $190 million through end of the lease, according to a March regulatory filing.
In connection with its new digs, Frost plans to sell two real estate parcels to entities affiliated with Weston for $6.5 million at some future date.
As a result of these arrangements, Weston is not considered an independent director.
A regulatory filing shows Weston now indirectly controls 164,113 Cullen/Frost shares, which were worth about $10.5 million based on Friday’s closing price of $64.24.Weston’s recent purchases are held by Trout Capital Ltd. He is sole owner of the partnership’s general partner.
Trout Capital acquired the shares May 1 at prices ranging from $67.06 to $69.44. The stock hit a roughly four-year low of $49.22 on March 23 but has closed as high as nearly $100 in the last year.
Weston is co-founder of Geekdom, the tech and entrepreneurial co-working space on Houston Street. In addition, he does charitable work through the 80/20 Foundation, which promotes entrepreneurship and education.
Bill Greehey
NuStar’s Greehey paid almost $3.9 million to acquire 355,000 units in the San Antonio pipeline company in March. The unit prices ranged from $5.93 to $13.35. He bought the units March 10, 12 and 18. Some of the purchases occurred when NuStar was trading at all-time lows.
With oil prices tanking as the coronavirus spread, oil producers started shutting in wells, hurting NuStar’s pipeline business. As a result, the units have been trading way off their 52-week high of $29.53, set in September. The company has responded by reducing spending, preserving cash and strengthening its balance sheet, spokesman Chris Cho said in an email.
Besides Greehey, two of NuStar’s officers and five board members bought units in March.
Cho said the purchases send a “strong signal to the marketplace that our board and leadership team are confident in NuStar’s sound business strategy and strong position to weather this economic downturn.”
Greehey now owns almost 10 million units, which were worth about $128.9 million based on Friday’s closing price of $12.93.
Greehey, 83, helmed San Antonio’s Valero Energy Corp. from 1979 through 2005, helping make it the nation’s largest refiner for a time. He then became NuStar chairman.
In 2005, he started the Greehey Family Foundation and has given hundreds of millions to fund the foundation, as well as to mostly local causes.
Both the Greehey Foundation and Weston’s 80/20 Foundation have pledged donations to assist during the coronavirus pandemic.
Louis Hoch
On April 1, Usio CEO and President Louis Hoch acquired 300,000 company shares for $324,000, or $1.08 each. The shares vest 10 years from the purchase date or if there is a change in control.
Since the acquisition, the shares had risen in value to $549,000 as of Friday, when the stock closed at $1.83. Still, the stock is well off its 52-week high of $3.48, set June 20.
Hoch now directly owns almost 2.6 million Usio shares, worth more than $4.7 million. He is Usio’s largest shareholder, with almost 14 percent of the stock.
Usio provides electronic payment processing services to businesses, including for credit and debit card transactions. It was known as Payment Data Systems before changing its name last summer.
The company reported last month that it had received financial assistance through the Paycheck Protection Program, which Congress approved as a lifeline for small businesses during the pandemic. Usio received an $813,500 loan, which it said would ensure the employment of its 51 employees. The loan can be forgiven if the company meets certain criteria.
Usio received the loan even though it had $1.7 million in cash and $1.1 million in accounts receivable on its balance sheet at the end of March.
On Tuesday, Usio reported that an increasing number of governments and charitable organizations are issuing prepaid cards with the company as a way to distribute relief funds to those affected by the pandemic.
Hoch, 54, has served in executive roles and on the board of the company since 1998. He took over as CEO almost four years ago. A regulatory filing describes him as an expert in payment processing, large systems development and call center operations.
A Usio spokesman didn’t respond to a request for comment.