SandRidge Energy (SD) needs to be taken out to the woodshed and whipped very hard. It has not maximized shareholder wealth. Five years ago, the stock traded at $64.58 on June 30, 2008. Today it bounces around at $5.70. During September, investors experienced prices between $7 and $8. The oil business and the price of energy has not been that bad.
Several large shareholders are sending letters asking for changes that will improve shareholder value. Many feel the board has too many conflicts to make good tactical and strategic decisions.
As money flow is negative, clocking in at 0.78, management continues to invoke shareholder rights plans and poison pills. Some 12% of the float is short with a very slight reduction in the recent past.
Analysts' consensus is anything from hold to overweight to outright buys. Investors buying this stock are looking at a corporate donnybrook. But you know that at under $6 per share you have an option on a fixable energy company that will one day benefit from rising energy costs.
The investment is not for faint of heart. Activist investors will need to use threats of negligence lawsuits and nicey-nicey departure packages, which -- while undeserved -- will help accelerate the departure of poor management. Once poor management exits, the turnaround commences.
The shorts have to be covered. The sky will look blue eventually. The stock is priced like an option without an expiry date. Not a core holding, but if you have room for some very deep value plays, put this one on your watch list.
So what's it gonna take to clean out the executive suite? Because in the meantime a miniature Warren Buffett by the name of Prem Watsa is praising management. He also controls about 10%. So management may just find itself on the auction block as one value investor tussles with another.