Chesapeake Energy (CHK) has been a controversial stock for years. Its co-founder, Aubrey McLendon, who left the company in 2013, was indicted in 2016 for allegedly conspiring to fix lease prices in Oklahoma, then died in a fiery, single-vehicle car crash the next day. Even before that, allegations of impropriety surrounded McLendon, who reportedly used corporate funds for all manner of personal expenses. Even without the personality issues, Chesapeake attracts controversy as one of the early adopters of and leaders in hydraulic fracturing, or fracking.
Emotions about the company, and therefore the stock, run high. That has made the job of the current CEO, Doug Lawler, difficult, but it has also made it an attractive stock for traders. CHK is down a massive 81% over the last year, but along the way there have been several rapid bounces, making it an attractive two-way trade.
The latest big drop came last week, when Chesapeake included a “going concern” warning in their 10-Q quarterly earnings filing with the SEC. CHK reacted as if bankruptcy were imminent, collapsing over fifty percent in a week. That isn’t that much of a surprise. There have been worries about CHK’s ability to continue in the past, so any official mention of a possible problem will be seized on and, given the volatility of the stock, produce a massive reaction.
A calmer look at what was actually said and at the situation at CHK, however, suggests that reports of the…