SandRidge Energy (NYSE:SD) needs to be taken out to the woodshed and whipped very hard. They have not maximized shareholder wealth. About five years ago the stock traded at $64.58 on June 30, 2008. Today it bounces around at $5.70. During September investors experienced between $7 and $8. The oil business and the price of energy has not been that bad.
Several large shareholders are sending letters asking for changes which will improve shareholder value. Many feel the board has too many conflicts to make good tactical and strategic decisions.
As money flow is negative clocking in at 0.78 management continues to invoke shareholder rights plans and poison pills. Some 12% of the float is short with a very slight reduction in recent past.
Analyst consensus is anything from hold to overweight to outright buys. Investors buying this stock are looking at a corporate Donnybrook. But you know at under $6 @ share you have an option on a fixable energy company which will one day benefit from rising energy costs.
The investment is not for faint of heart. Activist investors will need to use threats of negligence lawsuits and nicey nicey departure packages which while undeserved will help accelerate the departure of poor management. Once poor management exits the turn around commences.
The shorts have to be covered. The sky will look blue eventually. The stock is priced like an option without an expiry date. Not a core holding but if you have room for some very deep value plays put this one on your watch list.
So whats it gonna take to clean out the executive suite. Because in the mean time a miniature Warren Buffett by the name of Prem Watsa is praising management. He also controls about 10%. So management may just find itself on an auction block as one value investor tussles with another.
George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti