Back in 2008, Constellation almost lost its status as an independent company after mismanaging its energy-trading business. That sent the stock plummeting to $13 from $100. Worse, though, was the disclosure of an accounting error that underestimated the company’s liabilities if its credit rating were to be downgraded, which was “the last thing you wanted to hear if you were a shareholder at that moment in history,” Cramer said.
Shattuck, while scrambling to save his company, set up a deal where Constellation would be sold to Berkshire Hathaway, an arrangement that seemed to very much favor Berkshire. But at the last minute, France’s Electricite de France, one of the world’s largest utilities and a partner in Constellation’s nuclear business, swooped in and saved Shattuck, buying 49.9 percent of that joint nuke biz. The CEO still had to pay Warren Buffett $593 million to get out of the deal with Berkshire, though.
Cramer also mentioned Shattuck’s attempt in 2005 to merge with Florida Power & Light, a deal he terminated a year later.
Then there’s the CEO’s possible attempt to force EDF to buy a portfolio of mostly coal plants for $2 billion, which he will then use to buy Boston Generating Co. Basically Shattuck is trading his East Coast fossil-fuel-burning plants for some new ones in New England.
“Maybe this is just the world’s like smartest arbitrage play,” Cramer said, “but given Constellation’s track record, I got a hard time believing they know what they’re doing.”
What’s really mind-blowing is that people think Constellation is in such bad shape that it could catch a takeover bid. That some company, maybe Exelon , would come in, dump Shattuck and his team and then put Constellation back on track. Beyond just the question begging to be asked if you follow this reasoning—namely, who would want to buy such a troubled company?—Cramer wondered why investors would want to as well. They’re better off with Progress Energy, which yields 5.6 percent, higher than Constellation’s 3 percent.
In the end, Cramer thinks CEG “is poised for a huge sell-off, as all the investors who owned it for its nuclear aspirations dump the stock, possibly along with EDF and that's going to create a massive overhang.”
The bottom line, though, is that Constellation can’t be owned until Mayo Shattuck takes a permanent vacation. And until he does, he’s staying on the Wall of Shame.
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