Those who follow energy know that any stock associated in any way with natural gas production has been crushed in the last 12 months and many weighted toward oil have also suffered in the last two months heavily. This includes the long troubled Chesapeake Energy (CHK). We will not rehash the disaster the stock has been, but this week, a new bomb hit the stock, sending the name deeper into penny stock territory. That may sound extreme, but we are so far under $1 and at multi-decade lows that our worst-case prediction looks like it's coming to fruition: A reverse split. In this column we discuss what's going on and what we see happening as frequent traders of this volatile name.
A reverse split?
Did you listen to the post Q4 earnings call? We did. Chief Executive Doug Lawler said plans were being made for a reverse stock split in response to price at "very low levels." The comments came in the conference call with analysts following the earnings report which showed losses were narrower than expected but revenue fell more than forecast.
He stated (we may be slightly paraphrasing):
"While we have stock prices fall into very low levels, we will commence actions to reverse split the number of shares with the filing of the proxy in a few weeks."
As you know, Chesapeake trades on the NYSE. The criteria to remain listed on an exchange differs from one exchange to another. On the NYSE, if a security's price closed below $1.00 for 30 consecutive trading days, then the exchange could initiate a delisting process. Let us be clear, we do not believe CHK will let itself go to the pink sheets, so that would mean it would need to do a reverse split if it cannot retake $1. Since it certainly isn't going to retake a dollar, it seems the
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