CHESAPEAKE ENERGY $14.04 - New York symbol CHK

CHESAPEAKE ENERGY $14.04 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chkenergy.com; Shares outstanding: 659.3 million; Market cap: $9.3 billion; Dividend yield: 2.5%) is down 60.7% from its high of $35.75 last August. That’s largely because natural gas prices have fallen to near 10-year lows.

However, the drop has accelerated lately, partly on news that the company’s cofounder, CEO and chairman, Aubrey K. McClendon, took out loans that may have put him in a conflict of interest. It has also come to light that he ran a hedge fund between 2004 and 2008 that traded in the same commodities that Chesapeake produces.

The U.S. Securities and Exchange Commission (SEC) is investigating.

The SEC has said that its inquiry should not be seen as an indication that any violation of federal securities laws has occurred. However, the perception that McClendon has not been devoting his full attention to the interests of Chesapeake shareholders, and the potential for conflicts of interest, could slow the company’s restructuring and erode investor confidence.

Chesapeake is now a hold.

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