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Prem Watsa Takes Another Stab at SandRidge, After TPG-Axon Sends Third Heated Letter to Board

December 27, 2012 | About:
Today, Fairfax Financial Guru, Prem Watsa, has increased his stake in controversy-ridden SandRidge Energy (SD) by 9.12 percent, reported by GuruFocus Real Time Picks.

This latest transaction adds about 5 million shares to Watsa’s last reported holding, bringing his total share count to 59,526,646 shares.

The last time he increased his stake in SandRidge was November, when he added 1,152 percent, bringing his ownership to 10.5 percent of shares outstanding, at the time. (To read more about his previous stake increase, read Prem Watsa Surges in SandRidge Stake, Amidst Company Management Shakeup.)

Watsa’s move on the energy stock came just days after TPG-Axon Capital, who is 6.7 percent owner of SandRidge’s outstanding shares, sent its third letter to the company’s board of directors, breaking the news that it has filed a lawsuit to The Delaware Chancery Court to dispute the validity of the initial consent date that SandRidge declared in its Dec. 21 8-K filing, claiming that the company is intentionally making the voting conditions more difficult for shareholders in the process of replacing SandRidge’s current board of directors.

Other barriers, which TPG-Axon included in the letter claiming SandRidge’s management has placed a burden on shareholders in the voting process, include putting a poison pill in place and issuing an additional $37 million of shares to senior management.

“Now, the company attempts to shorten the period of time in which shareholders have to vote, claiming it has received consents in our solicitation – which is impossible as we have yet to even request them!” said Dinakar Singh, founder and CEO of TPG-Axon. “These are all just additional examples of Tom Ward and the Board of Directors’ utter disregard for shareholder interests.”

In addition to the recent lawsuit brought upon SandRidge, and aside from TPG-Axon announcing a number of more recent “disturbing facts that have recently been brought to their attention,” TPG accused SandRidge CEO Tom Ward and his son Trent of engaging in the unethical act of front running the company.

“We demand the Board disclose the degree to which it was aware of these actions. If the Board was unaware of these activities, then you should take immediate steps to investigate these serious transgressions and seek redress,” CEO Singh said. “On the other hand, if you were aware of the nature of these activities, then it is clear that you have been willing enablers of the greedy and unethical behavior that has caused enormous damage to shareholders.”

These aggressive attempts to overthrow and replace SandRidge’s management have been plaguing the company for months, as TPG-Axon, and other shareholders continuously released what they felt were reasons upon reasons for the company’s mismanagement.

This fact doesn’t seem to faze Watsa, however, who has deluged his portfolio with SandRidge shares, since only starting out with 280,000 shares in the third quarter of 2008.

Currently, SandRidge stock is up 0.8 percent, at $6.31 per share, a few minutes before the market’s close. Year to date, SandRidge’s market value has gone down about 23 percent.

1356645636132.pngSD data by GuruFocus.com

View more of SandRidge's data on 10-Year Financials. Also view the rest of Prem Watsa's latest portfolio picks here.

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About the author:

Dianne Tordillo
Dianne Tordillo is staff writer for GuruFocus.com. She reports on a variety of financial news, primarily dealing with investor portfolios and stock trades. Her articles also highlight insider trades, as well as the many useful features of GuruFocus.

Visit Dianne Tordillo's Website


Rating: 4.5/5 (11 votes)

Comments

kfh227
Kfh227 premium member - 1 year ago
Questions that need answering.

1) What are TPG's issues? All of them.

2) Are claims in (1) bogus.

I've been piggybacking Prem (and am in the green thanks to some limit orders to buy at $5) for no real good reason.
vgm
Vgm - 1 year ago
Kfh227,

You make an interesting point. TPG lays out its concerns with startling clarity in its letters. Yet judging by Prem Watsa's buying, he does not share those concerns. As far as I understand, Watsa and Ward are friends, but I can't believe he'd allow that to cloud his investment judgement for Fairfax. The very name Fairfax is derived from 'fair friendly acquisitions' and Watsa has a towering reputation.

If TPG's claims are unfounded, I'd expect Ward and the SD board to come out with rebuttals.

I remain perplexed - but a believer in Prem.
ramands123
Ramands123 - 1 year ago
Thanks for the artical

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