Chesapeake Energy’s stock plunged on Monday after a report in Debtwire said the company has retained a restructuring firm to help the company cope with $9.8 billion in debt. “Restructuring” is typically a nice way of saying “bankruptcy protection.” When the market caught wind of “restructuring” that’s just what they thought–and started selling like crazy. A year ago Chesapeake’s stock stood at $22 per share. Yesterday end of day it closed at $2.05 per share–down 33% from Friday and down over 90% in the last year. Chesapeake, in an attempt to get out in front of this latest turn of events, issued a statement yesterday saying the firm they’re using is nothing new–the firm was hired in 2010 and continues to advise the company. (Reuters reported that the firm was recently asked to evaluate restructuring for the company.) Chesapeake, with debt eight times the market value of the company, said in yesterday’s statement: “Chesapeake currently has no plans to pursue bankruptcy and is aggressively seeking to maximize value for all shareholders.” Saying you have no plans to do something is also saying at some point you may well do that thing. Publicly traded companies have to be careful with their statements because shareholders may come back to sue them later if they somehow feel mislead. So perhaps we should read Chessy’s statement like this: “We don’t want to declare bankruptcy, we have no intention of doing so, but if that’s the only option left, we will.” Here’s a recap of this still developing story…
Chesapeake Energy’s stock plunged on Monday after a report in Debtwire said the company has retained a restructuring firm to help the company cope with $9.8 billion in debt. “Restructuring” is typically a nice way of saying “bankruptcy protection.” When the market caught wind of “restructuring” that’s just what they thought–and started selling like crazy. A year ago Chesapeake’s stock stood at $22 per share. Yesterday end of day it closed at $2.05 per share–down 33% from Friday and down over 90% in the last year. Chesapeake, in an attempt to get out in front of this latest turn of events, issued a statement yesterday saying the firm they’re using is nothing new–the firm was hired in 2010 and continues to advise the company. (Reuters reported that the firm was recently asked to evaluate restructuring for the company.) Chesapeake, with debt eight times the market value of the company, said in yesterday’s statement: “Chesapeake currently has no plans to pursue bankruptcy and is aggressively seeking to maximize value for all shareholders.” Saying you have no plans to do something is also saying at some point you may well do that thing. Publicly traded companies have to be careful with their statements because shareholders may come back to sue them later if they somehow feel mislead. So perhaps we should read Chessy’s statement like this: “We don’t want to declare bankruptcy, we have no intention of doing so, but if that’s the only option left, we will.” Here’s a recap of this still developing story…