Why Chesapeake Energy's Shares Popped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chesapeake Energy (NYS: CHK) jumped 10% today after the company stripped founder Aubrey McClendon of his chairmanship.

So what: McClendon and Chesapeake have come under fire recently over issues including McClendon's ability to buy stakes in the company's oil and gas wells and his use of those stakes to borrow more than $1 billion to pay for his stake in some wells. He will remain CEO, according to reports.


Now what: Analysts and investors are applauding the move, but I wonder whether it goes far enough and whether this is the last we've heard of this. Removing McClendon from his chairmanship is like a slap on the wrist if he is going to remain CEO. The relationship is still a red flag for Chesapeake, but with a P/E ratio of 8.6 and a 2% dividend, the stock is looking attractive enough to overlook this problem, especially if he is eventually ousted as CEO.

Interested in more info on Chesapeake Energy? Add it to your watchlist byclicking here.

At the time this article was published Fool contributorTravis Hoiumdoes not have a position in any company mentioned. You can follow Travis on Twitter at@FlushDrawFool, check out hispersonal stock holdingsor follow his CAPS picks atTMFFlushDraw.Motley Fool newsletter serviceshave recommended buying shares of Chesapeake Energy. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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