What happened
Shares of real estate investment trust (REIT) Seritage Growth Properties (SRG 1.02%) dropped sharply out of the gate on Dec. 11, falling just over 11% in the first few minutes of trading. The big story, however, came out after the close on Dec. 10. Investors were clearly displeased.
So what
Seritage Growth was created by Sears Holdings as a way for the troubled retailer to monetize its property holdings. From the start, the REIT's goal was to redevelop its portfolio and find replacements for struggling Sears and Kmart stores. It had been executing that plan reasonably well given the circumstances, but the coronavirus put a wrench in the works in 2020. With store closures and retail bankruptcies on the rise, Seritage's future has gotten more complicated.
Image source: Getty Images.
That's the backdrop for two notable leadership changes. The first one happened in November, when the CFO announced that he was stepping down to "pursue other opportunities." Roughly a month later, the CEO has now announced plans to step down to "pursue another opportunity." Investors were clearly displeased with this turn of events. The CFO position has already been filled, and there's little doubt that a candidate for the CEO role will be found as well. But turnover at the top of a company can sometimes be a warning sign that things aren't going well, or highlight discord between the top brass and the board of directors.
Now what
From the get-go, Seritage Growth Properties was a turnaround story. It's really only appropriate for more aggressive investors willing to pay close attention to the stocks they own. Since the turnaround effort only got more complicated in 2020, because of the coronavirus, that's probably more true than ever. And now investors get to add management turnover on top of all of the other issues that need monitoring. Seritage Growth now deserves even more scrutiny if it's in your portfolio.
