Carl Icahn Wins! What About Shareholders? Chesapeake Energy Corporation (CHK)

Page 1 of 2

ICAHN CAPITAL Carl IcahnActivist investor Carl Icahn has won a crucial battle in his fight to remake Chesapeake Energy Corporation (NYSE:CHK). After gaining control of the board of directors and removing the company’s co-founder and chief executive officer Aubrey McClendon from the president post, he’s now managed to get the man fired. The company’s shares shot up on the news. While it may be nice to see the weight of a controversial CEO lifted, there’s still plenty of heavy lifting to do at the company. Is it time to step aside?

Strong Foundations, Weak Buildings
Aubrey McClendon helped to build Chesapeake Energy since its 1989 founding. He was an aggressive acquirer of land for drilling. He was also happily willing to try the new drilling methods that helped usher in the natural gas boom in the United States. That resource boom, however, has been part of his downfall.

With natural gas prices falling to historic lows, Chesapeake’s profitability started to crumble. Part of the problem was McClendon’s focus on gas, which made up the vast majority of the company’s revenues. When others had shifted to more profitable oil drilling, Chesapeake remained focused on gas.

As the business got more difficult, questions began to arise about McClendon’s personal dealings as they involved company business. This was a massive drag on the company on top of the natural gas price drop. Along the way, activist investor Carl Icahn stepped in. Not one to accept things as they are, he quickly started to jockey for control of the company’s board.

Ousting the Founder
With the media scandal and a government inquiry into McClendon’s personal activities, it probably wasn’t hard to convince investors that some changes were needed. At first that was just getting McClendon booted from the board president position, which also included Icahn gaining control of the board. Now, with McClendon’s imminent departure, Icahn has removed what many believed to be a notable distraction.

Sometimes removing a founder makes a lot of sense and works out well for everyone. Other times, it doesn’t work out as planned. For example, Apple Inc. (NASDAQ:AAPL) famously ousted Steve Jobs, with the board and CEO taking the company down an ill-fated path. Indeed, the journey into the commodity personal computer business almost brought the company to ruin.

Jobs left and formed NeXT in 1985 to make workstations for schools, later shifting to operating systems. While NeXT wasn’t a massive success, Apple’s performance was pretty bad and the company eventually acquired NeXT, about a decade after its founding, to bring Jobs back aboard. Apple’s performance since that 1996 acquisition has been nothing short of phenomenal, even taking the recent price decline into consideration. Clearly, removing Jobs didn’t work out too well.

In other instances, the founders depart, but things don’t get any better no matter how hard everyone tries. Yahoo! Inc. (NASDAQ:YHOO) would be a good example of that. The company was created by Jerry Yang and David Filo in the mid-1990s and was the first big Internet search tool (it was actually an index of sorts before it was a search tool). However, with the emergence of Google Inc (NASDAQ:GOOG), the company found itself quickly playing catch up.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!