Market slide forces McClendon to dump billions in Chesapeake stock
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56
By Don Mecoy
Published: October 10, 2008
Aubrey McClendon, chairman of Chesapeake Energy Corp., was forced to sell “substantially all” of the more than 33 million shares of his company’s stock to meet margin calls.
“These involuntary and unexpected sales were precipitated by the extraordinary circumstances of the worldwide financial crisis,” McClendon said in a statement issued after markets closed today. “In no way do these sales reflect my view of the company’s financial position or my view of Chesapeake’s future performance potential.” Chesapeake shares peaked at $74 on July 2. The stock hit a 52-week low today of $11.99 before closing at $16.52. Much of McClendon’s estimated $3 billion fortune was contained in his Chesapeake holdings. McClendon co-founded the Oklahoma City natural gas exploration and production company. As recently as July 15, McClendon purchased 750,000 shares valued at $42.9 million. McClendon said many of his purchases over the past three years were made on margin “as an expression of my complete confidence in the value of the company’s strategy and assets.” Buying on margin involves using borrowed money to buy securities. As the price of the security falls, the buyer must provide more money to maintain a required amount of equity in the security.
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Another article in Monday's paper said the company has borrowed the rest of its revolving amount of credit to invest in Treasury securities. Ummmm, isn't borrowing money to invest what led Mr. Clendon to lose $3 billion (more or less), now his company is going to do the same thing?
Selling assets to raise cash? If you sell your assets, what is there to back up the loans that others have said Chesapeake is up to the hilt with? They may be the #1 producer of natural gas in the country (a commodity that is selling for half what it was a few months ago), but if they aren't financially sound, can you say Enron? Or any other of the Big names of companies that have been in the news lately?
CHK will be fine. To all of you naysayers, tune in Tokyo....the entire economy is in bad shape. What you are seeing is a result of the financial crisis and has nothing to do with the stability of CHK....which by the way if you haven't noticed is the #1 producer of nat. gas in the country!
Paul, do some research before you make comments that make you look stupid. As you keep making comments, you are revealing your ignorance as to the facts.
Jill, you yourself have to admit that OKC and Oklahoma in general has done nothing to prepare for another oil bust, and they had nearly 3 decades to do so. I'm not sure if this is a result of laziness, ineptitude or just a major dose of complacency, but it's there, and cannot be denied...
For those defending this guy about the reasons he sold the stock, he sold at under 15 bucks a share when it was worth 70 a few months ago? If I "supposedly" had the money Aubrey has, then it seems to me I'd hold onto my shares of stock and use some cash from other sources, rather than take a multi billion dollar hit on selling my stock. That tells me he's "rich" on paper only and has no real cash he can quickly put his hands on to help carry him through times like this....
What folks need to do it read the Wall Street Journal a little more- Chesapeake may be a good company to be employed by, but understand they may be acquired just about anytime by a seriouly larger company, and those jobs will go away, just like conoco or phillips.
(Aubrey, if you're reading this, we send good mojo your way. Irrespective of what certain 'tards (who obviously have computers and loads of free time) think, you do a lot for this city and you *are* appreciated. Best to ya!)
The trickle down economic policies of the ultra right wing are turning in to a trickle up disaster for everyone.