Are These CEOs Screwing You Over?: SandRidge Energy Inc. (SD) and More

The only way such investor activism can work is if enough shareholders vote for change. If you’re a shareholder, you have a vote. Most shareholders never vote their shares, and that’s a problem. You should always vote your shares, no matter how small your stake, because you are a part owner of the company and its management affects you.

Another thing: Read the SEC filings for your existing or potential investments. Much of the information above was right there in the companies’ 8-Ks. To be fair, in SandRidge’s case some details only came to light when TPG-Axon hired a private investigator, but TPG-Axon put it all in the public domain. Research is your friend.

If you’re not a shareholder in these companies, you may just breathe a sigh of relief and get as far away as possible. That’s a perfectly rational strategy. If you’re the betting type, though, consider that there could be huge upsides for SandRidge and Hess if the activist investors are correct. TPG-Axon and Elliott Associates both believe that the companies’ share prices are deeply depressed because of poor management. If they’re correct, and if they prevail in their campaigns for change, then SandRidge and Hess could see significant spikes in value. It’s up to you to decide if you have the stomach for that kind of gamble!

Consider one final factor. I cited several measures of management inefficiency above, including credit rating, cost of debt, and overhead costs. One company kept popping up on the opposite – i.e. efficient – end of the spectrum. EOG Resources, Inc. (NYSE:EOG) is doing as well on these measures as SandRidge is doing poorly. That might warrant further investigation.

The article Are These CEOs Screwing You Over? originally appeared on Fool.com and is written by Sara E. Murphy.

Sara E. Murphy has no position in any stocks mentioned. You can follow her on Twitter @SMurphSmiles. The Motley Fool has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy.

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