Activist billionaire investor
just reported that his funds have bought an aggregate amount of
50 million shares of Chesapeake Energy (
), which is about 7.56% of total shares outstanding.
started to buy the shares on April 19 at $18 a share and has
added to the positions as the stock prices collapsed to around
$14. His last purchase was on yesterday, May 24. His average cost
is about $15.7 a share. Today Chesapeake stock closed at $15.99.
Chesapeake has attracted a lot of attention lately as investors
questioned the interest and compensation of its CEO Aubrey
McClendon. The company announced the day before yesterday that it
has implemented significant changes to the compensation of its
CEO and the board of directors, which includes reducing the
annual compensation of directors by 20% and reducing the CEO
total compensation for 2011 by 15%. The company stock has lost
close to 30% year to date. Since its peak in 2008, the stock has
lost close to 80%.
Chesapeake CEO Aubrey McClendon is certainly a capable CEO. He
founded the company with only $50,000 initial investment in 1989
and aggressively grew it into a natural gas giant with more than
11 billion in annual revenue and $41 billion in assets. At the
peak of 2008, the company had a market cap of more than $40
McClendon's aggressiveness certainly helped him build the
company. But he was also burnt badly by it. From March 2007 to
July 2008, he continued to buy Chesapeake stocks in his own
account as the stock prices runs up from $30s to $50s, on margin!
By October 2008, he has accumulated more than 32 million shares,
which was valued at more than $2 billion at the peak of the stock
price. Then the stock market collapsed and he got a margin call
and has to sell almost all of the stocks at an average of $18 a
You can find
his trade history
It is no doubt Mr. McClendon is capable CEO, as also
pointed by T. Boone Pickens
. But is he a good asset allocator?
Carl Icahn is certainly not your average investor. Now he has
invested hundreds of millions in the company. He has certainly
seen the value here and he will force more changes. Will you
follow Mr. Icahn into Chesapeake? Do you have enough confidence
in its CEO?
Disclosure: The author does not own CHK and has no intention of
buying it.About GuruFocus: GuruFocus.com tracks the stocks picks
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