Why Chesapeake Energy’s Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chesapeake Energy (NYSE: CHK  ) jumped 10% today after the company stripped founder Aubrey McClendon of his chairmanship.

So what: McClendon and Chesapeake have come under fire recently over issues including McClendon's ability to buy stakes in the company’s oil and gas wells and his use of those stakes to borrow more than $1 billion to pay for his stake in some wells. He will remain CEO, according to reports.

Now what: Analysts and investors are applauding the move, but I wonder whether it goes far enough and whether this is the last we’ve heard of this. Removing McClendon from his chairmanship is like a slap on the wrist if he is going to remain CEO. The relationship is still a red flag for Chesapeake, but with a P/E ratio of 8.6 and a 2% dividend, the stock is looking attractive enough to overlook this problem, especially if he is eventually ousted as CEO.

Interested in more info on Chesapeake Energy? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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  • Report this Comment On May 01, 2012, at 4:51 PM, Clint35 wrote:

    I think this is just a token move the board has made to make it look they're doing the right thing. They need a new CEO and the entire board needs to be replaced with people that won't let the new CEO do whatever he wants. This board has been letting McClendon do whatever he wants for too long. I would stay away from this one no matter how cheap it gets. How do we know McClendon doesn't have another map collection that he wants to sell to the company.

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