Why Medifast Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of weight-loss specialist Medifast (NYSE: MED  ) were looking unseemly to investors today, falling as much as 16% on news that its acting CFO would be resigning after just a month on the job.

So what: Medifast said acting CFO Edward Powers -- whose last day with the company will be Jan. 4 -- was leaving to "pursue other interests," and a spokesperson added that he found a job with another company. Powers was standing in place of former CFO Brendan Connors, who had resigned on Nov. 13, also to "pursue other interests."

Powers had joined Medifast in 2011 as senior controller, and will be replaced by Joseph Kelleman, director of finance, supply chain. The company will continue its search for a permanent CFO.

Now what: If Powers' departure is nothing more than his finding a better opportunity elsewhere, then the market is overreacting here. Medifast's weight-loss/health supplement sector has been getting hammered since Bill Ackman presented his argument for shorting Herbalife last Thursday, so investors may be a little skittish about anything fishy in the industry. Shares of Medifast fell 6% the day after Ackman's presentation, but there's no reason to think Powers' resignation is anything more than what the company says it is. Medifast notably does not employ the multi-level marketing strategy that Herbalife uses, and which has attracted criticism from Ackman and others, so it is largely safe from those concerns.

Stay on top of this developing story by adding Medifast to My Watchlist.


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