Hedge Fund Seeks Ouster of SandRidge Energy’s Board
A New York hedge fund filed papers with federal securities regulators on Wednesday seeking to oust the board at SandRidge Energy, the latest salvo in its continuing campaign against the struggling Oklahoma City oil and gas company.
The hedge fund, TPG-Axon Capital Management, which owns nearly 7 percent of SandRidge’s shares, submitted so-called consent solicitation documents with the Securities and Exchange Commission, offering up its own slate of directors to replace the current board.
SandRidge has come under pressure by TPG-Axon and another large hedge fund, Mount Kellett Capital Management, which have attacked the company over what they called an onerous debt load, reckless spending and incoherent business strategy.
TPG-Axon’s securities filing came two days after it sent a blistering letter to SandRidge’s board, demanding that it investigate whether Tom L. Ward, SandRidge’s chief executive, and his son had engaged in self-dealing and had directly competed with the company.
“It is our understanding that Mr. Ward and his son, Trent Ward, actively compete with the company, and in addition, have also engaged in repeated transactions in which they ‘front-run’ the company,” Dinakar Singh, chief executive of TPG-Axon, wrote in the letter. “It is astonishing that the C.E.O. of a company would engage in behavior that directly competes with his shareholders’ interests for his own personal benefit.”
The letter accuses the Wards of acquiring mineral rights and then leasing those rights to SandRidge for a profit. In securities filings this year, SandRidge said it had bought interests in mineral rights from an entity owned by Ward family trusts.
A spokesman for SandRidge, Greg Dewey, did not return telephone calls seeking comment.
SandRidge’s shares are down more than 75 percent since its 2007 initial public offering and more than 90 percent since its peak in June 2008. The stock was flat in Wednesday’s session, closing at $ 6.26.
TPG-Axon’s S.E.C. filing was made in conjunction with a lawsuit filed on Monday in the Delaware Court of Chancery. The lawsuit challenges a move by SandRidge to shorten the time that shareholders have to vote on changing the company’s bylaws and replacing the board with TPG-Axon’s slate.
“Sadly, we are not surprised that Tom Ward and the board of directors have resorted to shameful tricks to try and confuse shareholders and shorten the period of time in which they have to vote,” Mr. Singh said in a statement. “The actions Tom and the board have taken over the past several weeks reek of desperation and clearly illustrate their complete disregard for shareholder interests and transparency.”
The solicitation by TPG-Axon will be sent in early January to SandRidge shareholders, who would then have up to 60 days to consent to the fund’s proposal to elect a new board, which would include Mr. Singh.
Much of TPG-Axon’s criticism has been aimed at Mr. Ward. Mr. Ward started SandRidge in 2006 after leaving Chesapeake Energy, a much larger Oklahoma oil-and-gas concern that he co-founded and has had its own share of corporate governance issues in recent years. He is a part-owner of the Oklahoma City Thunder professional basketball franchise along with Aubrey McClendon, a co-founder of Chesapeake and its chief executive.
Mr. Ward’s total compensation in 2011 was $ 25 million, representing about half of the company’s earnings that year. SandRidge bestows numerous perks upon Mr. Ward, including the unlimited use of the company’s four corporate jets.