At the time, ol' Chesapeake was ridin' high (to use the vernacular of the locals), while Starbucks was lower than the broken axle of a prairie schooner in September (I'm just winging it now).
Since then, though, the money in Mr. McClendon's pocketbook has found a bit more room with which to roam around. The chart below traces Chesapeake’s value for the past three months.
As you can see, the partial owner of the Thunder has seen his shares plummet in value from $70 in July to $32 in September. Considering McClendon personally owns close to 34,000,000 shares, that’s a decrease in his net worth of more than one billion dollars.
Ah, you say, but surely McClendon acquired his shares back in the halcyon days of Chesapeake, and while the value has sunk recently, it is still far above what he paid for it way back when.
Ah, but you would be wrong, because your man Aubrey has purchased close to 2 million shares in the past three months, most of them at a price of between $55 and $60 a pop. Even those limited shares, less than 10% of his holdings and only purchased in the time it took to move the Sonics from Seattle to Oklahoma City, have cost McClendon $45 million in losses.
(And isn’t it amusing how McClendon so readily spares $120 million to purchase shares of his energy company, but was incapable of contributing a single dime to the renovation of KeyArena? Reminds one of the CCR song, Fortunate Son: “Some folks are born with silver spoons in hand/Lord, don’t they help themselves/But when the tax man comes to the door/Lord, the house looks like a rummage sale.”)
It also doesn’t help matters when CHK announces plans to cut drilling by 17% in the coming year, or when the price of natural gas drops by 50% since the Sonics relocated to Oklahoma City, delivering a lethal blow to the future health of the company. As you will see, though, losing $45 million in stock value would be the least of McClendon’s troubles in the past few years.
UNION DUES & BLUES
This past August, the United Steelworkers union held a rally at a West Virginia business park. Their target? Chesapeake and Aubrey McClendon. Among other complaints, the union accused the company of shirking its duties and short-changing long-term employees of their pensions and benefits, charges Chesapeake denies.
“Chesapeake is in the best financial condition of all these [natural gas] companies to take care of their employees. They just don't want to do it," a representative of the union charged. "Any money Chesapeake doesn't pay out in royalties or severance tax and employee wages and benefits is sucked right out of [the employees’ savings] and right into Aubrey McClendon's pocket.”
The straw that stirred the drink for the union workers, though, was another broken promise from Chesapeake.
In 2006, the company held a ground-breaking ceremony for a regional headquarters building, a massive project which would utilize numerous steelworkers. A project so important, West Virginia’s governor touted the gloriousness of it – and of Chesapeake – on his official website.
Since that groundbreaking, though, the atmosphere changed dramatically, especially when a jury found that Chesapeake and its subsidiaries (the tentacles of CHK are straight out of an Upton Sinclair wet dream) and another natural gas company had cheated the county out of unpaid gas royalties.
Essentially, a gas producer later bought by Chesapeake extracted natural gas from property owner’s land, but failed to inform them of the “true value of gas being extracted.” In other words, they told Joe Mountaineer that the gas they were taking out of his backyard was worth $20, when in reality it was worth double or triple that.
You can imagine how the jury reacted to the case. When they finally got finished adding in the total for punitive damages, McClendon’s company was looking at a fine of more than $400 million. Naturally, McClendon balked at the exorbitant sum of money, and Chesapeake appealed the ruling to the Supreme Court of West Virginia, to no avail.
Taking a line from the Clay Bennett Handbook, Chesapeake reneged on its promise to build the magnificent facility it had promised only a year before and scratched the whole regional headquarters, leaving the state, hundreds of employees, and their families twisting in the wind.
SAND MAN
When he’s not busy breaking promises in Appalachia, McClendon keeps busy on other fronts. In the past few months, his battle with the residents of the Northern Michigan town of Saugutuck over his proposed redevelopment of one of the last remaining pristine portions of the Michigan shoreline has garnered even more attention.
Two years ago, the residents had raised $40 million to buy a large piece of land from a local resident, hoping to stave off McClendon’s plans to put McMansions all over it.
[As an aside, in one of the first stories most of us read about McClendon, in the Journal Record by way of Henry Abbott’s TrueHoop, we see how he loves taking trips on his jet ski. It was from that jet ski that McClendon first spied Saugutuck in 1989, planting the seed in his mind to eventually redevelop the huge chunk of land.]
But back to our story. Our boy Aubrey, no fool he, plunked down $43 million, lobbied the state government to relax the state law limiting development on sand dunes which would hinder his development plans, and – when he’s not calling the residents of the area “completely dysfunctional” – now plans to go ahead with his project.
There is another, more salacious bit to this story as well. While to the many Saugatuck is merely a beautiful, pristine part of the Western Michigan landscape, to another group of society, it is much more. An “unofficial gay beach,” McClendon’s planned redevelopment would obliterate a popular destination for gay tourists. Considering that McClendon is an avid supporter of the “Americans United to Preserve Marriage,” is that merely a coincidence?
Difficult to say, but certainly an eerie coincidence.
Of course, given the state of the housing market in the U.S. these days, perhaps the best alternative is for McClendon to spend five years developing the site, only to find the folks willing to buy into his paradise will resemble the number of free agents willing to relocate to Oklahoma City.
WEDNESDAY
How McClendon’s manipulation of his company’s stock price is beginning to worry investors.
