NEW YORK--()--TPG-Axon, owners of more than 4.5% of the outstanding shares of SandRidge Energy, Inc. (NYSE: SD), 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
The full text of the letter can be found attached.
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About TPG-Axon Capital
TPG-Axon Capital is a leading global investment firm. Through offices in New York, London, Hong Kong and Tokyo, TPG-Axon invests across global markets and asset classes. The firm was founded by Dinakar Singh in late 2004 in partnership with TPG Capital.