Chesapeake Energy Downgraded At Tudor Pickering, Price Target Lowered to $0.00 (CHK)

Chesapeake is deer nuts.
(under a buck)
From MarketWatch, November 7:

Chesapeake Energy’s stock breaks the buck for the first time in 20 years 
‘Going concern’ warning leads to biggest two-day selloff on record; Tudor Pickering Holt analyst cuts price target to zero

Shares of Chesapeake Energy Corp. broke the buck Wednesday for the first time in over 20 years, as the oil and natural gas company’s “going concern” warning rattled Wall Street.

The stock CHK, +5.86%  plummeted 29.2% to 91 cents, after tumbling 18.0% to $1.28 on Tuesday in the wake of disappointing third-quarter results.

The 41.7% the stock has lost in two days is the worst two-day performance since the company went public in February 1993, passing the previous record of a 37.4% decline over the two days ending Feb. 8, 2016.

That was the first close below $1 since it closed at 89 cents on March 5, 1999, which marked the 29th-consecutive close below a buck. The lowest close during that stretch was 71 cents....MORE

It still amazes, that in an HFT world, the realization of bankruptcy is so slow to be accepted.
At the time we linked to Reuters in Tuesday's Natural Gas: Chesapeake Energy Gets a 'Going Concern' Warning from the Auditors (CHK) the stock was at "$1.345, down $0.215 (-13.782%) last"
(ease of reference, one of the reasons we post prices, the other being so schoolchildren can point and make fun)
meaning CHK had another $0.4381 (32.5%) of drop in it to get to yesterday's close.
And it's right there on page 30 in the 10Q.

Fluctuations in oil and natural gas prices have a material impact on our financial position, results of operations, cash flows and quantities of oil, natural gas and NGL reserves that may be economically produced. Historically, oil and natural gas prices have been volatile, and may be subject to wide fluctuations in the future. If continued depressed prices persist, combined with the scheduled reductions in the leverage ratio covenant, our ability to comply with the leverage ratio covenant during the next 12 months will be adversely affected which raises substantial doubt about our ability to continue as a going concern. Failure to comply with this covenant, if not waived, would result in an event of default under our Chesapeake revolving credit facility, the potential acceleration of outstanding debt thereunder and the potential foreclosure on the collateral securing such debt, and could cause a cross-default under our other outstanding indebtedness. 

Sometimes markets confuse me.
Back in 2009 I posted a few lines on adventures in short selling:

...Prior to and just after filing for bankruptcy, Northwest Airlines seemed to offer a short opportunity. A friend had me double-check his balance sheet analysis and I ended up selling myself on the idea. The common shareholders would be wiped out and the stock was trading around $1.25. We got the short on. The stock tripled or quadrupled. I started quoting Keynes (attributed) as we threw money at the monster:

The market can stay irrational longer than you can stay solvent.

It worked out, the stock went to zero and I kept quoting Keynes:

“It is the one sphere of life and activity where victory, security and success is always to the minority and never to the majority. When you find any one agreeing with you, change your mind...."

There a a few lessons to take away from this adventure:

1) If your timing is wrong you had better be right in your analysis.
2) It is really, really good to have a friendly banker.
3) Keynes talked a lot.

The airline was actually concerned enough about people buying the stock that they warned against the practice. Here's another NWA post, this time from 2015:

I'm always amazed when the stock of companies that have entered bankruptcy protection continue to trade as if the common shareholders had claims that were anything more than dreams.
Yet it happens over and over again. And can be immensely profitable if you can locate stock to short....

...Here's one of those bankruptcy stories

Northwest's reorganization jolts investors

Updated 5/31/2007 6:14 AM
Anthony Hicks thought he was getting a bargain when he saw Northwest Airlines stock trading for $1.70 per share.

Tempted by that low price, the 39-year-old Detroiter bought 2,000 shares earlier this year, knowing that the airline was restructuring in bankruptcy. It was in bankruptcy that Northwest's stock had skyrocketed from 60 cents to $7.50 in January, on speculation that the company would merge with another airline.

Hicks saw that surge and hoped to catch it on a second wave.

There was no second wave. What Hicks didn't know was that those Northwest shares would be worthless the day the company emerged from bankruptcy.

That day is today. After 20 months of shedding billions of dollars in debt and costs, Northwest is set to leave bankruptcy protection.

The airline had warned since it filed for bankruptcy in September 2005 that its stock could be cancelled....

The company was warning for twenty months that the stock would be canceled!....

Cancelled.