This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Icahn Wins Chesapeake Energy Board Battle

Stocks in this article: CHK XOM

Louis Simpson, a former Berkshire Hathaway investment manager who joined the board in 2010, was singled out by Icahn in his letter as the only board member who should remain. Chesapeake Energy also said it would look to gain an exemption from an Oklahoma law that requires staggered corporate boards so that its entire board will go to a shareholder vote in 2013.

Monday's settlement appears to have cooled Icahn's ire at the company's managerial issues. "We appreciate the Board's willingness to listen to shareholders and to respond appropriately. Under Aubrey's leadership, Chesapeake has assembled great assets and I am confident I can help the Company create significant shareholder value from these assets," said Icahn in a press release.

"We believe the independent directors will push for a more conservative capital plan and aggressive asset monetization. Additionally, we believe the reconstituted board would be more amenable to a potential takeover," said Canacord Genuity analyst John Gerdes in a Monday note to clients.

In May, Icahn noted in his letter that his activist stance has led to an increase in market value of approximately $55 billion for shareholders at over a dozen companies in recent years. "We would like the opportunity to do the same at Chesapeake," wrote Icahn, who like Chesapeake CEO McClendon says that the company's assets are worth far more than current market prices.

In Monday trading, Chesapeake shares rose over 6% to $16.52. Still, the company's shares are off over 25% in 2012 and 45% in the last 12 months respectively, amid concerns about its finances and CEO McClendon's 2.5% personal investment in almost all of the wells that the company's drilled over the years. The rally on Monday also came directly on the heels of a 6% sell-off in Chesapeake shares last Friday, a day on which shares began trading at $16.52, the same price shares closed at on Monday.

Aside from shuffling board seats to add independent investor input into Chesapeake's management decision making, Icahn will have plenty of work cut out for him to turn a profit on his near $800 million investment in the company, which UBS analysts calculated were made at a price of $15.76.

Underlying the tough talk about a board shakeup, it's important for investors to remember that a shoring up of the balance sheet through sales asset sales is the key focus for the oil and gas company in 2012. With or without Icahn, asset sales are the make or break issue as the company tries to bridge a funding gap while tilting its energy portfolio longer-term toward oil amid decade low natural gas prices.

Moody's calculates the company needs to sell $7 billion in assets to avoid a ratings downgrade and breach of its debt covenants. "Even $7 billion in asset sales could place Chesapeake's covenant compliance for its revolving credit facility in some doubt, and the company would still face a significant funding gap in 2013," wrote Moody's analyst Peter Speer on May 31.

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs