Shares of Global Eagle Entertainment (NASDAQ:ENT) were taking a dive today, falling after CEO Dave Davis and CFO Tom Severson resigned suddenly yesterday. As of 1:09 p.m. EST, the stock was down 29.3%.
It's suspicious when both a CEO and CFO leave a company suddenly, and Global Eagle offered few details in its press release that announced the appointment of a new CEO, Jeff Leddy, who has served on the board since 2013.
The release said CEO Davis left the company to "pursue other endeavors," but that he would continue to support the company as a consultant in the interim period. The travel-based broadband specialist also said that CFO Severson resigned, effective yesterday, though it did not offer a reason for his departure. Global Eagle has begun a CFO search and said that Leddy would act as CFO in the interim.
The sudden departure of the CEO and CFO, which could be evidence of accounting problems, prompted an investigation from shareholder rights law firm Johnson & Weaver, which said it was looking into possible violations of federal securities laws by Global Eagle.
Global Eagle also said it would file its 10-K after the SEC March 16 deadline, noting among other factors that it needs "to complete additional financial-closing procedures associated with the Company's material weaknesses in internal control over its financial reporting" (emphasis added). Such a statement seems to indicate accounting inconsistencies, which could force the company to restate past financial statements or incur fines from the SEC.
At this point, it's too early to speculate what those accounting problems could be, but concerned shareholders should keep an eye out for more news to come and consider contacting Johnson & Weaver for more information on their investigation.