Private hedge fund operator Third Point LLC, which is run by activist investor Daniel Loeb, listed Chesapeake Energy Corp. as one of the fund’s largest new holdings in a June exposure report to investors, according to several market followers.
Marketfolly.com and several other groups reported on Tuesday that Third Point did not include a Chesapeake investment in its previous exposure report. 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. Western Gas went on to be acquired the following year by Anadarko Petroleum Corp.
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.” Early in 2007 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. Pogo was purchased by Plains Exploration & Production Co. later that year.
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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