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Several large hedge funds and investment advisory firms sold large positions in Chesapeake Energy Corp. (CHK) during the first quarter.
The sales by some of the largest movers and shakers on Wall Street is a sign that the company was losing some its luster with key investors even before it was rocked by a governance scandal in April.
The company has long been criticized by analysts for the Byzantine financial arrangements it needs in order to fund its expensive drilling program. Chesapeake, the second-largest natural gas producer in the U.S., bore the "brunt of investor anger" when a mild winter led to decade-low natural gas price levels, said Oppenheimer analyst Fadel Gheit.
In any case, by shedding the shares, these investment funds spared themselves a major drop--Chesapeake is trading at $13.50, at a 52-week low and down 42% from the end of the first quarter. In recent weeks, revelations about Chief Executive Aubrey McClendon's personal loans from financial institutions that had done business with Chesapeake triggered further scrutiny of the company's finances and prompted the board to strip McClendon of his chairman role.
Also, concerns about liquidity resurfaced last week when the company warned in a filing that it might delay deals in order to protect its revolving credit facility. In a sharp twist, the company obtained a $4 billion loan to pay its credit facility, but that has so far failed to assuage investors. The stock is down 3.5% in midday trading Thursday.
S.A.C. Capital Advisors LP, the hedge fund run by prominent financier Steve Cohen, shed 91% of its Chesapeake shares during the first quarter, retaining only stock worth about $541,645 as of March 31.
Millennium Management LLC sold 86% of its shares in the Oklahoma City-based oil and gas company, and at the end of the first quarter had about $5.7 million worth of shares left.
Fidelity Management & Research Co., which serves as investment advisor to Fidelity's mutual funds, sold 59% of its Chesapeake holdings, but it held shares worth $164 million at the end of the quarter.
Highbridge Capital Management LLC sold all its Chesapeake holdings in the first quarter. Two Sigma Investments LLC sold 98% of theirs. OZ Management LLC shed 64%. Adage Capital Advisors LLC sold 57% of its Chesapeake stock.
A contrarian bet: Citadel Advisors LLC, which sextupled its Chesapeake holdings to 2,952,233 shares, worth $68.4 million at the end of the first quarter.
All of the firms either declined to talk about their positions or didn't respond to requests for comment. The information about their holdings comes from regulatory filings and other disclosures compiled by Dow Jones Newswires.
-By Angel Gonzalez, Dow Jones Newswires; 713-547-9214; firstname.lastname@example.org