Activist hedge fund Third Point LLC is now the fourth-largest investor in Chesapeake Energy Corp., according to stock market insiders.
Marketfolly.com and several other analyst groups reported on Tuesday that the private hedge fund operator, which is run by Daniel Loeb, listed Chesapeake as one of Third Point’s largest new holdings in its June exposure report to investors. The previous exposure report by Third Point to investors did not include a Chesapeake investment. The hedge fund’s top positions in June were in order Yahoo!, gold, Delphi, Chesapeake and Apple, according to Marketfolly.com.
Loeb is known for taking stock in companies and then writing letters in which he expresses his disapproval for the company’s performance or for its management. In May Loeb revealed that Yahoo!’s new CEO, Scott Thompson, did not have a computer science degree as had been assumed; Thompson resigned later that month.
Third Point’s investments and Loeb’s letters have affected at least two U.S. natural gas producers in recent years.
In 2005 Third Point acquired an 8.6% stake in Western Gas Resources and became its largest shareholder. Loeb then urged the producer to buy back 10-15% of its shares from the market to increase shareholder value (see Daily GPI, Aug. 19, 2005). Western Gas went on to be acquired the following year by Anadarko Petroleum Corp. (see Daily GPI, June 26, 2006).
In 2006 Third Point purchased a 7.2% stake in Pogo Producing Co., and later that year Loeb demanded in a letter to company shareholders that Pogo initiate a process to sell the company “in whole or part” (see Daily GPI, Dec. 4, 2006).
In its 1Q2007 earnings announcement early the next year Pogo’s management team announced that a “strategic alternatives process, which includes the possible sale or merger of Pogo, the sale of its Canadian or other significant assets, and changes to the company’s business plan” were ongoing (see Daily GPI, April 25, 2007). Pogo was purchased by Plains Exploration & Production Co. later that year (see Daily GPI, Nov. 7, 2007).
Chesapeake’s second largest shareholder Carl Icahn told CNBC’s Fast Money on Monday that CEO Aubrey McClendon was “a very bright guy and he’s put a lot of great assets together…The problem was [the company] gambled too much in buying them and they have a cash gap. Now they have to cut expenses but I think they can.”
Icahn said he felt good about the company’s corporate governance now that the board has been reconstituted and former ConocoPhillips Chairman Archie Dunham has been appointed nonexecutive independent chairman to replace McClendon.
“I can tell you, the shareholders control the company now,” he said. “I think natural gas in the next few years will go quite a bit higher and Chesapeake will be there to take advantage of it. I would not sell Chesapeake. I would be against selling this stock.”
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