American Energy Capital Set To Sell Stock, Experts Urge Caution

Wednesday, December 18th 2013, 6:08 pm

A new company attached to former Chesapeake CEO Aubrey McClendon is creating a bit of a buzz in the financial world. The company American Energy Capital Partners announced it will be selling stock. But financial experts say investors should use caution before buying in.

AECP will be offering stock at $20 a share and at first glance may look like an opportunity to get in on the ground floor of the next Chesapeake.   

Brenda Zacharias thought so. She dabbles in the stock market now and then. So when she heard about the stock offering by a new company managed by Aubrey McClendon, she took notice. 

"I thought that [the] guy [that] ran Chesapeake Energy might be something to look into," said Zacharias.

But the offering isn't American Energy Partners, the company McClendon recently started after leaving Chesapeake. It's actually American Energy Capital Partners, a company McClendon will manage.

"Aubrey is a very dynamic, successful, energy executive, so not to be interested for people who live in Oklahoma would have to be dead between the ears," said Zacharias.

Still, Steve Agee, the dean of the Meinders School of Business at Oklahoma City University says based on the preliminary prospectus, this appears to be a risky investment.

"They really need to read this and understand what those risks are," said Agee.

Among the risks outlined in the filing: "There is no guarantee that distributions will be paid", AECP is "obligated to pay substantial fees to our general partner and the manager (McClendon)." And there are "substantial conflicts" of interest between the investors and McClendon and other parties "which could result in decisions that are not in your best interests."

Zacharias says that information takes her beyond her comfort zone.

"I'm not for ‘too risky' right now," she laughed.

AECP is hoping to raise $2 billion on the stock offering.