My Quick Thoughts on Boston Omaha Corporation…
A complete disaster?
Yesterday, Boston Omaha (BOC) released news Alex Rozek Co-CEO resigned “to pursue new entrepreneurial opportunities” although expressing being long-term oriented for the last 9 years…
This is what is actually going on…
Adam Peterson (The other co-CEO) is now the only CEO for Boston Omaha, where he is also the managing partner of Magnolia Group, his investment partnership. Magnolia manages over $600M, and owns large interests in Boston Omaha (18%), America’s Car-Mart $CRMT (11%), RE/MAX $RMAX (16%) as well as Nicholas Financial $NICK (33%).
Nicholas Financial (NICK) was an auto lender for the last 38 years until they recently sold off all their loans for $65M. They also just spent $37M on a fiber business. It’s not very often your internet is provided by a subprime auto lender…
Further, NICK and BOC share three directors (Jeff Royal, Brendan Keating, & Adam Peterson), collectively owning 34% of NICK.
With significant ownership, three direct connections to the board, and NICK's recent fiber acquisition aligning perfectly with BOC's focus on existing fiber operations, this could be a great asset for BOC. Additionally, NICK has around $30 million in cash from loan sales, just acquired a $37 million fiber network, and is trading at $50 million.
This business switch feels out of left field, yet there are some explanations for this:
BOC has four fiber operations within BOC that they’ve acquired since 2020.
Peterson stated: “As we focus on seeking to achieve additional efficiencies in CURRENT business lines and reinvesting both cash flows and any excess capital mostly into INTERNAL business opportunities for the time being, we collectively came to the decision to part ways.”
There’s no reading between the lines, Peterson wants to work on growing the existing operations of Boston Omaha (billboard, fiber, insurance), while Rozek wanted to continue deploying cash (and possibly raising more equity at depressed prices) to diversify into other industries. Peterson further states Boston Omaha’s strategy going forward as “committed to focusing on our goals of expanding margins in our existing businesses and reinvesting cash flows into PROFITABLE business opportunities.”
Peterson’s intentions are clear, and it appears that Rozek was more interested in growing the business, not crafting and managing Boston Omaha’s existing operations. The news of Rozek resigning was shocking for shareholders, as he’s commented numerously on a long-term vision. However, having two CEOs isn’t efficient in most businesses, especially when one owns much more stock than the other (BOC’s case).
With one manager, owning much more than the other while still having a 50/50 say is a tricky system to operate in. It’s more than “tricky” when there’s a disagreement on capital allocation strategy.
Additionally, Peterson may want to control NICK, whereas Rozek may not which could be the factor for Rozek’s resignation. However, at the end of the day, investors should get more clarity at the annual meeting later this year as well as in the letter (coming in near term). (And besides, speculation doesn’t get you too far)
This Isn’t All Bad
Peterson seems able to run the ship at BOC alone while focusing on the core business, expanding margins, and furthering efficiencies which is what investors need. BOC has quality assets that are highly overlooked along with industry tailwinds that are severely misunderstood.
Subscribe and stay tuned for the most detailed Boston Omaha writeup where I go through each misconception & overlooked opportunity!
BOC requires a manager who can operate its current operations with existing cash flows. The days of diluting shareholders to raise capital for growth should be over along with a 50% cut to the compensation plan after Rozek left.
The analogy that I have for BOC today is:
You own a new vegetable farm, you hire 2 people to till the fields, plant the seeds, water the vegetables, and grow it. Now that the farm is in operation, it only requires 1 person to maintain and grow it. If the second worker decides they don’t want to focus on growing the vegetables already planted, then to hell with them. Why have 2 workers, when one is great and wants to grow the crop while the other wants to leave?
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