Chesapeake stock drops, despite coming end of CEO's well program

The SEC doesn't confirm or deny the existence of informal inquiries or investigations.

Danne Johnson, a law professor at Oklahoma City University, said investors shouldn't read too much into the SEC news. Johnson is a former staff attorney and branch chief for the SEC's Enforcement Division in New York City.

Johnson said informal inquiries are used to gather information by staff attorneys and aren't an indication that wrongdoing has occurred. The next step, a formal investigation, involves issuing subpoenas and compelling witnesses to testify.

“As a staff attorney, if the things you're able to collect look like you might need to spend a little more time, then you have to get permission from someone higher up in the enforcement division to open up a formal inquiry,” Johnson said.

Bruce Day, a director at the Crowe & Dunlevy law firm in Oklahoma City, said informal inquiries by the SEC happen frequently and could cover any number of subjects. Day, chair of the firm's securities group, is a former SEC attorney and administrator of the Oklahoma Securities Department.

“It would be a private, confidential inquiry,” Day said. “I don't think it is newsworthy. The only thing that counts is if you're the subject of a formal SEC proceeding. All the rest of it is just gossip.”

Meanwhile, analysts praised the move to end the well program.

Oppenheimer analyst Fadel Gheit said Chesapeake should have abandoned the program years ago, but that Thursday's news was good for shareholders.

Still, Chesapeake's stock dipped more than 3 percent Thursday, closing down 57 cents at $17.56 a share. It has dropped more than 8 percent since news of McClendon's loans broke last week.

Weiss said he was troubled by the fact that McClendon secured financing for the well program from companies involved with Chesapeake without the board's knowledge.

“It reinforces my view that changes need to be made,” said Weiss, who last week urged the company to replace McClendon and its board.