RE:RE:Selling CKE short As John Friesen correctly points out. following a sale of assets, CKE will still have liabilities to cover. To a neighbouring producer, the 13 (11.23 net) horizontal wells alone could be worth up to $45 million (or 20c per share) just based on their replacement value. Based on their potential production value, the numbers vary, but this could go as high $300 million or $1.29 a share. As to the debts, $7 to $8 will be owing on its credit line and $33 million on decommissioning obligations. However, by my estimate, the Brierly operating wells and plant at a minimum only represent about 15% of CKE break up value. After covering the liabilities the net break up value could be over a $1.00 a share. However, the only time outside investors (and potential purchasers) will be able to independently get a reasonable handle on CKE value will be when management gets to share all the information on its assets and liabilities in an open and transparent form. To date, and to my mind, they yet to do this - even though there is a strategic review now in progress and this information could be vital to any decisions shareholders could be required to make.
It is is the Director's responsibility by their mandate to see that there is an “appropriate disclosure of information to the public in an informative, timely and broadly disseminated manner”. That what Directors get paid for and that's one of the reasons they get to award themselves options. To my mind, they have sorely failed in this duty and the current trading price of CKE reflects this.
Sadly as things are playing our right now CKE is more likely to be “taken private” as a whole rather than sold piece by piece. In this way, the independent Directors, who will be making this decision, will get to keep their options, and management will keep their jobs (and their options). These options, depending on their exercise cost, could be worth over $1.00 each. With CKE trading at 5c a share ordinary outside shareholders could consider themselves lucky to get an offer of 10c a share. Go figure the ethics in all this.
If you don't like this prospect, then I suggest you let AIMco know. In all this, from the start to finish it is and will be their hand that rules the roost.