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Welcome Deadspin readers. Last week, during the stock market crash, one of the key figures in the Sonics-to-Oklahoma City drama lost nearly $2 billion dollars. Here's how:
As the battle for our Sonics unfolded over the past few years, Clay Bennett came to symbolize the greedy bastards who, along with the help of weasel-in-chief Howard Schultz, ran off with our NBA basketball team.
But make no mistake, Bennett wasn't the brains behind the Great Oklahoma Rip-off. Nope. Clay Bennett was simply the crew-cut sportin' bag man. The most influential person behind the deal was Aubrey McClendon, the Oklahoma City oilman who kept a low profile throughout the legal wranglings here in the Emerald City. McClendon is CEO of Chesapeake Energy (CHK), an oil and natural gas driller. You may have seen him on those "Pickens Plan" TV ads in recent weeks.
But while McClendon was staying out of the limelight here, he was busy back home in the dust bowl last summer.
You see, as gas and oil prices rose this spring and summer, McClendon wasn't happy with just making boatloads of cash on hyper-inflated gas prices. No, he doubled-down, and took out sizable loans from his broker and bought huge chunks of CHK stock in his own company as the share price roared from $37 to almost $70 this summer.
Then, when oil prices began to unravel and soon after, the stock market got all black-hole-ish, those banks who loaned him the money came knocking, wanting it back, because they were, uh, going out of business. It's called a "margin call," and for it to happen to corporate CEO, it's really quite rare. CNBC talking-head Jim Cramer earlier today called the news of McClendon's margin call "the most shocking thing I've heard in this whole market." And that's saying a lot.
So, in the past few days, as the stock traded down in the teens, McClendon was forced by the Wall Street heavies to sell all of his CHK stock at a massive loss. Records show that McClendon owned over 33 million shares earlier this month.
What's this all have to do with karma, you ask? The stock reached an all-time high of $69.40 on July 2, the very same day the Sonics settled the lawsuit with the City of Seattle, essentially marking the end of the Seattle Supersonics franchise. The stock closed today at $16.52, after trading as low as $12.19 at one point in the trading day.
The carnage to McClendon's portfolio reads like a Jerome James box score: McClendon's holdings in Chesapeake Energy went from a high of $2.27 billion on July 2, to a low of $408 million earlier today, for a net loss of $1.86 billion. (We imagine he handed off the proceeds to his broker, then ran off across the desert like a bunny with its tail on fire.)
Yes, folks. That's a "B." And it's a real loss, not a paper loss.
All gone, just like our Sonics.
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To be totally honest, when I read the headline I was kind of hoping he had been mangled in a horrible tornado but then I realized that would make me an evil person.
This does however, restore some of my faith in God.
How many broken kneecaps does $2 billion equal?
This thing went way over your head. The man pocketed the money from the margin loan. The fact that he had to sell the stock to cover the margin call allows him to skirt the SEC insider stock sale rules. He got over, and everyone thinks he bit the dust. Not so.
Nobody thinks the guy is destitute. He's #3 on Forbes CEO compensation list, at over $110 mill per year.
But still, the drive into the office on Monday won't be all that pleasant, we imagine.
And like Jerome James, lets hope that McClendon is allowed only a trash bag full of his belongings on the way out.
You folks in Seattle may be interested in some news about Clay Bennett and his friends, including Aubrey McClendon.
Clay Bennett and Aubrey McClendon and his tight group of friends, are all part of social/economic/political structure benefiting from state income tax credit scheme costing Oklahoma taxpayers $100s million per year. The scheme operates through a complex set of loopholes built into a state law that allows wealthy individuals and corporations to avoid paying state income taxes. The law mandates the cost and identities of those involved remain secret. We have obtained some critical documents. More details can be found at http://prowlingowl.com
Clay Bennett's wife is a Gaylord. The Gaylord family, one of the wealthiest in Oklahoma, owns Gaylord Entertainment (resorts and several Nashville venues including Opryland) and the Daily Oklahoman. The Oklahoman under the control of Clay Bennett's wife and her sister, Christi, ignores the tax credit fraud and as well as other questionable issues involving Gaylord friends and associates. Christi and her husband along with Clay Bennett's brother and Aubrey McClendon are some of the biggest beneficiaries of the tax credit avoidance scheme. The scheme operates through a small group of investment companies, one where former football coach Barry Switzer is an owner and promoter. More details can be found at http://prowlingowl.com
Nick
nick@prowlingowl.com
HA! Screw him and Bennett! We will never forget!!!
As an aside, Gaylord once owned KSTW-11 in Tacoma. Remember when CBS briefly left KIRO for KSTW? That was a result of a Gaylord power play when CBS suddenly needed an affiliate in Dallas, where Gaylord owned an independent TV station. The swap from KIRO to KSTW was part of the deal.
BTW, Clay Bennett will never go broke. He hides his money in his ears.
is the 110 mil a year McClendon gets in compensation in stock?
I am too lazy to check Edgar so, I will guess he isn't paid in cash.
BTW, the smaller partner companies bound in leases may be a bigger problem.
I think it goes without saying most if not all of McClendons compensation is in stock. Companies can only deduct one or two million in executive compensation if it's cash. In addition the executive pays a lower tax rate if he/she is paid with stock since the capital gains rate is 15%.
No, it had to be said, here is another set up.
What keeps him from selling compensation that is in the form of stock on information he only knows?
Anyway, he needed to liquidate assets to cover losses, watch trading places, I am willing to wager one dollar that we can steal the team from Seattle, CNG is orange juice futures, big oil is eddie murphy.
He is not in the poor house by any measure. Any restricted stock he has is also worth a lot less right now. If he borrowed against it to buy the Sonics then he may be upside down on his stock, for now.
Forbes 400 richest has him at #134 with the Donald Trump, net worth 3 billion.
So, do the math, he is worth just over half that now, he will get by somehow.
Blloomerg story said his compensation is just over 18 million a year, 3/4 of it in stock.
Issued high, forced to sell low this year could put him in a negative this year in compensation, when all is said and done.
He worked for free this year.
There are some good points above about what this does to McClendon, but those assume his business was limited to Chesapeake. Unfortunately for McClendon that is far from the situation. McClendon has been on a big spending spree accumulating huge chunks of land for development and building the Chesapeake campus. There was the Sonics, ranches for hobby. He leveraged either his own or his company's assets. He no longer has the asset base. Those holding notes start calling the notes. This is when things start to unravel and the house of cards starts to fall. Something we see here in Oklahoma every time energy prices skyrocket. People get on that rocket like it will keep climbing forever. Eventually it comes crashing down. That happened with another high flier in Tulsa, only a few months ago, when it came to light Tom Kivisto the suddenly wealthy head of SemGroup faced the same fate of over leveraged hedging. SemGroup lost $3.2. billion over night.
He has his wine collection.
The Honors College at the University of Oklahoma now bears the McClendon name. Only a select few have spoken out. Please write in with any support you have to offer.
http://oudaily.com/news/2009/apr/23/students-seek-change-honors-college-name/