Chesapeake Energy’s (NYSE: CHK) stock is tanking on the controversy caused by its CEO, Aubrey McClendon. Several reports found that McClendon ran a lucrative, $200 million hedge fund from 2004 to 2008. The fund traded in the same commodities that Chesapeake produces. Additionally, McClendon took out over $1 billion in personal loans using his stakes in Chesapeake wells as collateral.
Aside from apologizing for the controversy, McClendon is calling the recent reports about himself “misinformation.” Nevertheless, Chesapeake says it’s in the process of replacing McClendon and ending the program granting him personal stakes in company wells.
Despite Chesapeake’s direct action against McClendon, shareholders’ pain will like react unfavorably to the board of directors, says John Coffee, Professor of Law at Columbia University:
“I expect the shareholders are not going to be happy with this board and that we’re going to see the major proxy advisors recommend an infusion of new directors.”
For more information on Chesapeake Energy and its CEO, Aubrey McClendon, see Wall Street Daily’s Jason Simpkins’ recent coverage.