Contact Information: Contact: Jack Fruchter, Esq. Arthur J. Chen, Esq. Abraham, Fruchter & Twersky, LLP One Penn Plaza, Suite 2805 New York, New York 10119 Tel.: (212) 279-5050
Abraham, Fruchter & Twersky, LLP Files Class Action Suit Against Chesapeake Energy Corporation
| Source: Abraham, Fruchter & Twersky, LLP
NEW YORK, NY--(Marketwire - February 26, 2009) - Abraham, Fruchter & Twersky, LLP filed a class
action lawsuit in the United States District Court for the Southern
District of New York on behalf of purchasers of Chesapeake Energy
Corporation ("Chesapeake" or the "Company") (NYSE : CHK ) stock issued
pursuant to the registration statement and prospectus (collectively, the
"Registration Statement") filed with the Securities and Exchange Commission
("SEC") in connection with Chesapeake's July 2008 secondary public stock
offering (the "Offering").
The Complaint alleges that Chesapeake, certain of its officers and
directors, and certain underwriters of the Offering with violation of the
federal securities laws by issuing materially false and misleading
statements about Chesapeake's business activities and financial condition
in their Registration Statement. Chesapeake is the third largest
independent producer of natural gas in the United States. Chesapeake
engages in the acquisition, exploration, and development of properties for
the production of crude oil and natural gas from underground reservoirs.
According to the complaint, on July 15, 2008, Chesapeake completed a
secondary public offering of 28.75 million shares of common stock at $57.25
per share, receiving approximately $1.65 billion in gross proceeds, with
net proceeds of $1.586 billion. The complaint alleges that the Registration
Statement issued in connection with the Offering was materially false and
misleading because it failed to disclose numerous facts which were required
to be stated therein, including: (i) that the Company's exposure to natural
gas price declines had not been adequately limited by the hedging actions
the Company had undertaken prior to the Offering, including its decision to
increase its hedge position from 20% to 80% of its production, as a growing
proportion of the hedging agreements on Chesapeake's 2009 production
contained so-called "knockout" provisions that eliminated the
counter-party's financial obligation once the price of natural gas fell
below a certain benchmark; (ii) though the Company disclosed it had entered
into hedging contracts to protect its production from falling prices, the
Registration Statement failed to disclose that a significant proportion of
these contracts had been made with one of the underwriters in the Offering,
Lehman Brothers, though based on Lehman Brothers' rapidly declining
financial condition, Lehman Brothers would be unable to fulfill its
financial commitment -- rendering Chesapeake's "protection" meaningless;
(iii) in the months leading up to the Offering, Chesapeake's aggressive
hedging activities (and those of certain of the underwriter defendants) had
been significantly running up the price of natural gas and Chesapeake's
stock price, which moves in tandem with natural gas prices; (iv) that
Chesapeake's "land men," i.e., lease brokers, had been aggressively bidding
up the prices Chesapeake was obligated to pay in leases and royalty
agreements in the months leading up to the Offering, causing Chesapeake to
pay unreasonably high prices for certain leases and royalty contracts; (v)
that the Company was failing to write down impaired goodwill on the assets
it was acquiring, causing its balance sheet and financial results to be
artificially inflated; and (vi) that the Company's internal controls were
inadequate to prevent the Company from improperly reporting its goodwill.
During late 2008 and early 2009, as these omitted facts were revealed to
the market, the price of Chesapeake stock declined to less than $12 per
share, approximately 80% below the Offering price.
Plaintiff seeks to recover damages on behalf of all purchasers of
Chesapeake common stock during the Class Period (the "Class"). The
Plaintiff is represented by Abraham, Fruchter & Twersky, LLP which has
extensive experience in securities class action cases, and the firm has
been ranked among the leading class action law firms in terms of recoveries
achieved by a survey of class action law firms conducted by Institutional
Shareholder Services. If you would like to discuss this action or if you
have any questions concerning this notice or your rights as a potential
class member or lead plaintiff, you may contact: Jack Fruchter or Arthur J.
Chen of Abraham, Fruchter & Twersky, LLP at 212-279-5050, or via e-mail at
jfruchter@aftlaw.com or achen@aftlaw.com, respectively. If you wish to
serve as lead plaintiff, you must move the Court no later than April 27,
2009. Any member of the proposed class may move the Court to serve as lead
plaintiff through counsel of their choice, or may choose to do nothing and
remain a member of the proposed class.