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Chesapeake Energy Update and Correction. What Does Step Down really Mean! Investors Still Screwed $CHK

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Chesapeake Energy

Chesapeake Energy (Photo credit: Wikipedia)

Numerous readers including David J. Chamberlin Executive Vice President / General Manager, Dallas for Edelman who I presume is engaged by Chesapeake (NYSE:CHK) have pointed out that Aubrey McClendon did not resign as the CEO but he did step down as Chairman. In my earlier post I wrote “The recent resignation of Aubrey K. McClendon – Chairman and CEO will not extinguish the fire storm`. The reader comments are correct; Aubrey K McClendon did not resign as CEO. My apologies about a technical issue which may beg the real question.

Aubrey K McClendon also did not step down as CEO. But he did step down as Chairman. So what does step down really mean! The public relations guys see a really big difference. Step down has a softer less harsh connotation than such words as resigned, relieved, pushed out, fired, dismissed, replaced, disciplined or god forbid terminated.

Step down does not adequately address the issue of destroyed shareholder value. Mid March investors valued the company at a few pennies over $25.50. The close on May 3, 2012 $17.19 which was up on the day. That`s just over $8 per share loss! Now that`s a step down. Investors are still wondering if there are more step downs to follow.

But let’s be clear about the facts. Aubrey K McClendon is currently the CEO. The board of directors seems to be OK with Aubrey K McClendon staying on as CEO.

I also still stand by the gist of my earlier post about when you should consider investing in Chesapeake. Mr Chamberlin I hope your OK with this clarification.

Oh by the way Mr Chamberlin of Edelman do you have any comments about Chesapeake confirming a SEC Informal Inquiry. The SEC was careful to point out an informal inquiry does not mean any securities laws were broken or violated. But they have requested that both the company and Mr McClendon retain certain documents. Hey no problem as he is still the CEO.

George Gutowski writes from a caveat emptor perspective.

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Chesapeake Is it the New Enron? Value Investor Considerations $CHK

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Chesapeake Energy

Chesapeake Energy (Photo credit: Wikipedia)

Chesapeake Energy Corp (CHK) is in the market for a new boss. We’ve all heard the twisted conflicted governance challenged story. It’s not good. Calls to replace the entire board are only just starting up. Shareholder class action lawsuits are gearing up. My god the world is coming to an end. So is this the ultimate value investor play. Value investing is a buy ugly sell pretty formula. You have to have courage and correct analysis.

Well the price is down. The corporate governance story has destroyed shareholder value. The company is a huge gas play and the market price for gas is down. Very down. So isn’t this the time to buy. Buy low sell high. That’s the formula isn’t it.  Well the price of gas is historically low. We do have a domestic surplus and last winter was very mild so the consumer home owner did not come through as needed. That issue is the same for dozens of other gas opportunities. If you are patient you can make the cycle work for you.

So we default to the governance storm. The recent resignation of Aubrey K. McClendon – Chairman and CEO will not extinguish the fire storm. Who would want to take the job. To many ghosts and skeletons in the closet. So you can go through the executive search which is time-consuming and expensive to come up with what. My thoughts are if a recruiter calls you for the job go to the interview. It’ll be one of the most interesting interviews you’ll ever have. How will the search be conducted? Who makes the ultimate decision? The shareholders will be wanting pristine pureness. Will the candidate fit into the corporate culture or will he need to reshape it. Reshaping cultures is more difficult than finding oil and gas. Another good old boy will not do. By the way the board needs to be revamped. They have their finger prints on this problem as well.

Then you have to consider corporate momentum. The governance issue will be the mother of distractions. Instead of exploiting oil and gas the senior leadership team will be swatting away pesky governance flies. They will not be working full-time on maximizing shareholder wealth. So if you are looking at Chesapeake and wanting to buy when the storm clouds are the darkest, wait up. Do not click the buy button yet.

My personal prediction will be to bring in a one year neutral caretaker type to help stabilize. He should have a personal fixation about opening closet doors and checking out the contents. If we see the caretaker then it’s time to consider being a value investor. If we see someone who fits in with the corporate culture well lets just say shareholder wealth will not be maximized.

George Gutowski writes from a caveat emptor perspective.

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