Finally, let’s gaze upon the most insidious fact of all. Since the beginning of 2011 Aubrey has earned $108 million from proceeds of well sales for his 2.5% stake due to FWPP. Even more repulsive, end of 2011 SEC filings report the value of Aubrey’s FWPP interests based on PV9 is $852 million. PV9 is an oil valuation metric which takes the estimated future net oil and gas revenues and then takes the present value discounted at 9% of all the proved oil and gas reserves. By my arithmetic, from January 1, 2011 to close on Friday June 3, 2012 CHK was down 41.23%. From its past 52 week high CHK has fallen a precipitous 56.4%. Shareholders don’t despair. It’s all about Aubrey. He’s getting his nine parts. From the rare maps, to the fine wines, houses, and jets all’s well in Aubrey land. Even his basketball team (Aubrey owns 20%) the Thunder is fighting for a spot in the NBA finals.
So here is why everybody should care about the CHK fiasco. Simply put, it undermines the integrity of our capitalist system in general and our financial markets in particular. A system founded on transparency has turned opaque. No longer can investors be certain that a company balance sheet is not riddled with off balance sheet liabilities. Rightly there is loss of confidence and anger by the investing public. That some people are esurient is the natural order of things. That some CEO’s (I have Aubrey in mind) stack their board with cronies to enrich themselves at the expense of shareholders is not how our markets were intended to work. My negative bias toward government regulation has been stated previously. Yet something must put a stop to allow this CEO to collect hundreds of millions while shareholders lose billions. That disconnect cannot continue indefinitely. It’s the stuff of which revolutions are made.
Meanwhile, Aubrey still enjoys his wine collection. I confess my own weakness for a fine left bank Bordeaux. It is appearing less and less likely my dinner invite is in the mail. I will update after the June 7 annual meeting. My fingers are crossed for Mr. Icahn.