Chesapeake Energy CEO gets margin call; sells entire stake

Posted Oct 11th 2008 9:10AM by Zac Bissonnette
Filed under: Chesapeake Energy (CHK)

In a stunning reversal of fortune, Chesapeake Energy Corp.'s (NYSE: CHK) CEO put out a press release after the close of trading on Friday disclosing that he "involuntarily sold substantially all of his shares of Chesapeake common stock over the past three days in order to meet margin loan call."

Aubrey K. McClendon stated that "I am very disappointed to have been required to sell substantially all of my shares of Chesapeake. These involuntary and unexpected sales were precipitated by the extraordinary circumstances of the worldwide financial crisis. In no way do these sales reflect my view of the company's financial position or my view of Chesapeake's future performance potential. I have been the company's largest individual shareholder for the past three years and frequently purchased additional shares of stock on margin as an expression of my complete confidence in the value of the company's strategy and assets. My confidence in Chesapeake remains undiminished, and I look forward to rebuilding my ownership position in the company in the months and years ahead."

Read the Form 4 here. It's a little bit sad to watch this happen. McClendon's stake in Chesapeake landed him at number 134 on the 2008 Forbes list, He is also a part owner of the NBA's Oklahoma City Thunder.

It's now clear what one major driver of the sell-off in the company's shares this week was -- it may have presented a buying opportunity and, while it's sad to see someone wiped out, this aggressive insider buys with borrowed funds indicate strong confidence in the company.

Tags: Chesapeake Energy, CHK, Energy, McClendon

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Reader Comments (Page 1 of 1)

10-12-2008 @ 5:25PM

Tas said...

I agree completely. A CEO who borrows money using his stock as collateral and uses those funds to buy more stock is about as bullish as you can get. As CEO of a public company its quite difficult to sell shares in your own company. People tend to frown on stocks with lots of insider selling. This further adds to the bullish argument. My question, what does he know that would prompt him to bet everything on his own company? It will be interesting to watch this play out. It is tragic that this kind of thing can happen in our markets. Maybe Mr. Cox of the SEC can explain it. He's the guy who keeps changing the rules.

By the way, I am long Chesapeake.

12-12-2008 @ 7:43AM

Scott said...

I think this is a case of irrational exhuberance....watching his stock go up continuously, kicked in the greed factor. I would be more concerned that someone running a company could be this foolish with risk....and I think it shows in his companies balance sheet. Their debt should be more of a concern than Cramer or the other people talking up the company have admitted to.