After experiencing a roller-coaster of a year in 2012,
jam-packed with investigations, falling market value, public
scrutiny and company shareholders demanding his ouster,
Chesapeake CEO Aubrey McClendon has announced his decision to
resign, sending Chesapeake (
)'s stock to surge about 11 percent yesterday after the news
It seems like Chesapeake is well on its way to recovery, with
McClendon's resignation knocking off the first step, taking
effect in the beginning of April. Since 2013 started, its stock
has risen from $16 to its price today of $20.05.
Reading the press release announcing the news, Chesapeake board
chairman, Archie Dunham, classically set up a hopeful message
that brushed off McClendon's alleged past mismanagement:
"Chesapeake is at an important transition in history," he said.
"And Aubrey and the board of directors have agreed that the time
has come to select a new leader. The board will be working
collaboratively with Aubrey to make a smooth transition to
Chesapeake's next CEO."
Gaining Back Value
In the past year, Chesapeake has lost 14 percent of its market
value, only a portion of the amount it lost in the last five
years, declining almost 50 percent within the latter time frame.
There is no question that the company's position in the market is
a major focus for the company's execs.
One of the company's largest stakeholders, activist Guru
, has repeatedly voiced his wrath in the past about Chesapeake's
then-board members prodding the company's "value destruction."
Seeing immediate improvement as soon as new members were elected
to Chesapeake's board, it drove shareholders to crave
continuation of the trend.
Southeastern Asset Management, company of Guru Mason Hawkins, and
13.5 percent owner of Chesapeake's outstanding shares, expressed
this sentiment in its third quarter letter:
"Chesapeake gained 2% in the quarter and rose 39% from its
low point in May. The substantial governance changes we discussed
in last quarter's report not only lifted the stock, but also
improved the prospects for more conservative capital allocation
With McClendon stepping down, Dunham noted he, along with the
rest in control, will strive to strengthen Chesapeake's balance
"Capital allocation and operating decisions will be made with the
goal of prudently growing the company's intrinsic value per share
for the long-term benefit of shareholders," he said.
In the last 12 months, Chesapeake's EBITDA growth rate has
dropped 78 percent, despite its 4.6 percent positive revenue
growth rate in its 10-year financials.
Chesapeake is scheduled to release its earnings announcement on
Pride in Chesapeake
McClendon's 24 years with the company as founder and CEO, has
garnered him respect from shareholders.
"Aubrey has every right to be proud of the company he has built,
the world class team of people at Chesapeake and the collection
of assets he has assembled, which in my opinion, are the best
portfolio of energy assets in the country," Icahn said.
After multiple allegations brought against McClendon about
basically taking advantage of company assets for his personal
use, leading to the SEC, IRS and the Justice department's
investigations, the board finally revealed in the same letter
announcing McClendon's resignation that there was no improper
conduct by McClendon.
Moreover, his resignation, the release stated, was due to what he
felt were "philosophical differences with [Chesapeake's] new
board," whatever they may be.
McClendon has been an avid buyer of his company's shares
regardless of its dwindling market value. (
You can view his trade history at McClendon's Market
GuruFocus ranks Chesapeake 1 star in Business Predictability, 5
in Financial Strength and 6 in Profitability and Growth.
View the stock's warning signs, historical price and P/E ranges
in Chesapeake's Analysis Page.
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