NEW YORK ( TheStreet) -- The rumors about Carl Icahn taking a stake in Chesapeake Energy ( CHK) were true, though what it will mean for the embattled -- and stubborn -- oil and gas company remains uncertain. Activist investor Icahn revealed a 7.6% stake in Chesapeake Energy after the close on Friday, larger than the 4% stake that had been rumored in the press for weeks, and larger than the 5.8% stake that Icahn had amassed in late 2010, before selling at a quick profit. While Icahn's 2010 investment didn't pan out as an activist push and the shareholder return destruction and corporate governance issues have only worsened since for Chesapeake Energy, this time Icahn says he is playing the stock for activist reasons.
Icahn called for the replacement of at least 4 board members of Chesapeake Energy, excluding only former Warren Buffett lieutenant and current Chesapeake board member Louis Simpson from his ire at the board for failing to hold management accountable. Even though Chesapeake is searching for an independent chairman, Icahn referred to the process, as "woefully inadequate in both process and substance," in a letter to the company's board, and said the company as a whole lacks "meaningful credibility." At a recent dinner Icahn requested the company's CEO Aubrey McClendon consider shareholder representation on the board, a request denied by McClendon and the board the very next day, citing the company's ongoing search for an independent chairman. Icahn writes in the letter that the quick rejection of his shareholder proposal was "completely disingenuous and illogical." "This board has led the company through a highly publicized spate of corporate governance breakdowns while amassing an astounding $16 billion funding gap, which we believe has contributed to the share price decline of over 55% from the 52-week high," Icahn added in his letter. It's important for investors to remember that a shoring up of the balance sheet will be 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. Chesapeake Energy CEO Aubrey McClendon was happy to fan previous speculation of Icahn's interest in the company's shares, which have fallen 30% year-to-date. "We wouldn't be surprised if Carl became a large shareholder," said CEO McClendon on a May 14 analyst call after releasing its 10-Q filing with the Securities and Exchange Commission. "He made, I think, over $500 million and he called me to thank me when it was all over," added McClendon when asked about Icahn's investment. "I have a good relationship with Carl."