Company Admits Bankruptcy, Soars From $7.77 to $77.50

Mish

It's been a wild month for Chesapeake Energy (CHK), amid speculation over bankruptcy.

A month ago, May 11, Chesapeake Energy Confirms it Hired Advisors to Explore Bankruptcy Options.

Chesapeake warned that it might not be able to restructure its debt nor improve its financial position. Because of that, "management has concluded that there is substantial doubt about the Company's ability to continue as a going concern."

The company took an additional step to prepare for a potential bankruptcy filing by prepaying $25 million in incentive compensation to 21 top executives so that they stay motivated. This move mirrors a similar one by Whiting Petroleum, which approved $14.6 million in cash bonuses to its executives just days before it filed for bankruptcy. 

Synopsis 

  • In the week in which Chesapeake Energy confirmed it hired bankruptcy advisors, it paid $21 million in bonuses. CHK traded between $8 and $12. 
  • On June 4 CHK was just under $15.
  • On June 5 CHK blasted to $25.
  • Then on June 8, CHK did a moon shot to $77.50. Shorts were massacred.
  • Today, June 9, CHK is halted, down 65% on the day.

June 9 Energy Sector Smash

Barron's reports Chesapeake Energy Could File for Bankruptcy. Small Energy Stocks Are Plunging

Chesapeake Energy (CHK) stock was halted on Tuesday morning after a report said it plans to file for bankruptcy. Before the trading halt, its shares were down more than 40% [Mish note 65%], sending ripples through the energy industry. Small oil-and-gas company stocks were plunging by double-digits, a remarkable shift in just 24 hours.

As the retail shorts were forced out, the market makers accumulated the shorts. Then the company was halted.

The price will plunge back towards its predetermined fate now that shorts covered between $25 and $77. 

CHK ended the day down $45.67 to $24.25. That's a 65% plunge.

Mish

Comments (21)
No. 1-9
rojogrande
rojogrande

"The company took an additional step to prepare for a potential bankruptcy filing by prepaying $25 million in incentive compensation to 21 top executives so that they stay motivated."

This type of looting should also be illegal.

Jack and Joan
Jack and Joan

And the casino rolls on.

aqualech
aqualech

Excuse me, but who would buy this company at anywhere near $70 just days after it convincingly threatened bkrpcy? Why?

Are there programs out there that only look at where the next stampede is breaking out?

And why was it halted on the way down and not the way up? Shorting at $77, if one could ever have been quick enough, would have been good.

Although suffering badly from FOMO lately, shit like this keeps reminding me that the stock market is kinda scary.

Tengen
Tengen

Aubrey McClendon should have stuck around. His prison sentence would have been minimal and he'd still be very rich. Was he really naive enough to think that fraud and racketeering would merit anything more than a slap on the wrist?

Fl0yd
Fl0yd

Did CHK obtain(rd:steal) bailout moneys?

gregggg
gregggg

Passive algo trading printed fed currency.

Sechel
Sechel

Fracking and Tar Sands is in trouble. The whole industry was predicated on shortages in fossil fuel and rising prices. The idea that carbon energy prices would decline due to an abundance of discoveries an new technologies wasn't really considered. All I heard growing up going to school was peak oil and Hubbert's peak We don't hear that anymore. And renewable such as solar and wind were barely thought about. No wonder Harold Ham and Continental Resources have been lobbying Trump for a ban on Saudi oil

In New York everyone's talking about co-gen, LED light bulbs, VFD's on large motors and more fuel efficient vehicles all things not conducive to increased energy dependence.

anoop
anoop

Can't they just do a secondary IPO or sell a few billion in bonds to raise some cash? haha

Casual_Observer
Casual_Observer

Wasnt that the CEO of Chesapeake who had to pay alimony of $800M to his wife as part of the court ordered divorce settlement. They should clawback his salary.


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