The first trading day after SandRidge Energy Inc. agreed to major leadership changes to settle a proxy battle, the Oklahoma City energy company's stock price remained largely unchanged, although trading volume was heavy.
The shares closed down 14 cents, or 2.4 percent, to $5.71 as nearly 27 million shares changed hands — roughly three times the average daily volume.
Industry analyst Mark Hanson said he was not surprised by the price change.
“We're more of the mind that while in the short run management teams can do some damage, but at the end of the day, the single biggest driver is what is in the ground,” said Hanson, an analyst with Morningstar in Chicago.
In a settlement announced Wednesday between SandRidge and dissident shareholder TPG-Axon, the shareholder group essentially took control of the Oklahoma City energy company. TPG-Axon has maintained that SandRidge CEO Tom Ward should be replaced.
The SandRidge board has been expanded to 11 to add four TPG-Axon representatives. The new board will review whether Ward should keep his job. A decision is expected by June 15.
Hanson said he is “100 percent certain” Ward soon will be replaced.
Greg Dewey, SandRidge vice president of communications, said predictions about Ward's future are pointless.
“It's unreasonable to speculate on what 11 independent men are going to decide,” Dewey said in an email.
Neverless Hanson said, “With (CEO) Tom Ward leaving, you can probably trim the edges off overhead spending, cut director compensation and sell the corporate jets. But what ultimately makes money at the end of the day is going to be what comes out of the ground and what it sells for. Even with Ward out, that doesn't change.”
“Given the public pronouncement that TPG-Axon has made about Ward, it's hard to see that we could get to June 15 and the board says he's been so phenomenal that they aren't going to get rid of Ward. That would fly in the face of the PowerPoint presentations, letters and CNBC appearances (TPG-Axon CEO) Dinakar Singh has made over the past four months. It would hurt his credibility.”
If Ward stays, three current directors will resign and a fifth TPG-Axon representative will be added, giving the shareholder control of a majority of the board.
Hanson said the three-month delay could be because TPG-Axon hopes to find in its investigation reason to terminate Ward with cause, which would save the company nearly $96 million that Ward stands to receive if he is terminated without cause.
“If they have yet to fully prove they can terminate with cause, this agreement will give them three months to prove it out,” Hanson said. “Maybe he (Ward) agreed to the deal because he thinks he can beat that rap and that they can't fire him with cause.”
SandRidge President Matthew K. Grubb is leaving the company Friday, the company announced.
TPG-Axon began the proxy fight in November when it released an open letter criticizing SandRidge management and directors. The shareholder has blamed SandRidge's leaders for allowing the company's stock price to plummet 80 percent over the past five years while paying an executive compensation package among the largest in the industry and allowing Ward's family to improperly profit from the company's efforts.
“We do not believe that management's track record suggests great vision and wisdom; rather it has been marked by reckless and chaotic behavior,” TPG-Axon said in its Nov. 30 letter to shareholders.
SandRidge has denied the claims of improper behavior.
“The board has reviewed issues related to these allegations several times over the company's history and has found no wrongdoing to have taken place,” the SandRidge board said Jan. 25.
TPG-Axon and SandRidge declined to comment on Thursday.