SandRidge (SD) Shows Heavy Volume as Holder Seeks Changes

November 8, 2012 11:45 AM EST
Volume on SandRidge Energy, Inc. (NYSE: SD) is heavy today as shares maintain a strong position in positive territory. Earlier in the session, a 4.5 percent holder of the stock issued a release announcing it sent a letter to the Board of SandRidge. The full release is reprinted below, through the letter can be accessed here.

Shares of SandRidge are up about 7 percent Thursday, with 23 million shares having traded so far. The daily average is about 11 million shares.

The press release:

TPG-Axon, owners of more than 4.5% of the outstanding shares of SandRidge Energy, Inc. sent a letter today to SandRidge’s Board of Directors.

In the letter, TPG-Axon outlines the following:

* SandRidge stock has been a disastrous performer. It has been the single worst performing energy stock in the US market, and in the bottom 1% of the broader market, since its IPO in 2007. SandRidge stock has declined 76% since its 2007 IPO, and over 91% from its peak in 2008.

* The market has lost confidence in management, which is reflected in the greatest discount to current Net Asset Value of any US energy company.

- The dramatic decline in the stock, and massive discount to Net Asset Value, has been caused by three factors:

* Management strategy has been incoherent, unpredictable, and volatile, amplifying uncertainty regarding the future course of the company;

* Poor strategic planning and reckless spending have resulted in repeated ‘financial emergencies’, and caused massive dilution, soaring cost of capital, and unnecessary risks for shareholders; and,

* Corporate governance has been appalling, which has drained massive value from shareholders and completely misaligned management and shareholder interests.

* Despite management missteps, SandRidge shares offer extraordinary value. On a standalone basis, fair value for SandRidge stock is $12 to 14, with significantly greater upside possible through a strategic sale or sensible development of assets in coming years.

- As a result, in order to unlock the value of the company in the best interests of shareholders, TPG-Axon calls for:

* The Board of Directors must be significantly reconfigured, with certain directors replaced by credible, independent directors, chosen after extensive consultation with large shareholders. In addition, large shareholders should be invited to join the board, if they so desire.

* The Board must then reconfigure management and leadership of the company. TPG-Axon believes CEO Tom Ward’s credibility is too damaged to continue in his role. The company must bring in new management that is viewed as credible, experienced, and highly competent.

* The Board should hire an advisor to explore all strategic alternatives. Given the difficult challenge of restoring confidence, the Board must also consider whether the value of the company’s assets will instead be maximized through a sale to another company.

* TPG-Axon hopes management will work constructively with shareholders to achieve change, but their relentless focus will be on ensuring that necessary steps are taken to build and maximize shareholder value

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