Chesapeake Shareholders Approve Controversial Reverse Stock Split

With shares now trading at just $0.16, the reverse split is intended to increase the per share trading price to satisfy the $1 minimum bid price requirement for continued listing on the NYSE.

As a result of the reverse stock split, 200 shares of CHK’s common stock will automatically combine into one share, and the number of shares of common stock outstanding will be accordingly reduced from roughly 1.96 billion to 9.78 million.

The split will become effective at 5PM April 14, 2020, with trading of the split-shares resuming under the existing trading symbol “CHK” on April 15, 2020.

Overall, analysts rate CHK a Strong Sell, according to TipRanks. In the last three months, 7 analysts have published sell ratings on the stock with only 1 analyst staying on the sidelines. Meanwhile the average analyst price target stands at $0.2 (25% upside potential). (See Chesapeake’s stock analysis on TipRanks)

Scotiabank analyst Matthew Sorenson recently downgraded Chesapeake Energy to sell from hold, as did Kashy Harrison of Piper Sandler. Harrison also took his price target to $0, down from $1.

The stock has cratered 81% year-to-date with investors anxious that the company’s hefty debt load combined with extremely low oil prices will push CHK into bankruptcy.

Indeed, on the company’s fourth quarter earnings call, CEO Doug Lawler told analysts “[W]hile we have a stock price that has fallen to very low levels, we will commence actions to reverse split the number of shares with the filing of the proxy in a few weeks.”

Some commentators call a reverse stock split ‘the kiss of death’ as it can lead to further erosion in share prices- and does nothing to resolve the issues that caused the stock to fall in the first place.

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