On Nov. 29, Twitter (TWTR) released a statement that CEO Jack Dorsey would be resigning effective immediately and handing the reigns to the company's chief technology officer, Parag Agrawal. Shares of Twitter soared upon the news in earlier trading hours that day.
The new CEO of Twitter has already made significant organizational changes since taking over from Dorsey, and investors should likely expect more changes from the company in the months ahead. But this raises the question, what stock would you invest in if the current CEO quit? In this segment of Backstage Pass, recorded on Nov. 29, Fool contributors Rachel Warren, Jason Hall, and Toby Bordelon share their picks.
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Jason Hall: Toby, this is like right up your alley, this is perfect that you came up with it. What's another stock out there that you would love to buy if the current CEO quit?
Rachel Warren: I'll take this one first. Gosh. This is in an imaginary universe because this would never, ever happen. I know this is controversial, so I'm just prefacing it that way. But one company I would consider owning, particularly if the CEO quit would be Facebook [now Meta Platforms]. [laughs].
I do not currently own shares of Facebook, we've talked about this before on various shows, but obviously there's been a lot of, I think, ethical concerns for some investors regarding holding Facebook. It's a great business from an investor perspective, the business is exceptional. I write about the stock a lot. I love the company from a business perspective.
All the concerns that have been brought to the forefront with the Facebook Files and the recent investigations, which are on top of a lot of concerns, I think that have been out in the general public for years surrounding Facebook are some of the reasons I continue to not invest in the company, even though I like it from a business perspective.
Obviously, recent rebranding to Meta and the announcement of it further venturing into the metaverse, I do not think Zuckerberg is going anywhere. But I do think it would be interesting to see what the company would look like under different leadership. But at the same time, you could also argue that maybe Meta would not be Meta without Zuckerberg. So, kind of an imaginary world right there. [laughs]
Hall: I get it and I agree with you Rachel, but the challenge for me is that the guy still has a controlling stake in the business. As much as he's been a visionary, it's maybe having his influence removed in terms of all of the issues that so many people have pointed out with the impossibility of aligning the business with what is necessarily best for its users because of the financial incentives, right?
Warren: Yeah, there's no real financial incentives to do that.
Hall: No, none whatsoever. Toby, I'm just going to say it right now. Everything that you are about to say, I agree with it.
Toby Bordelon: I suspected you might, Jason. For me, honestly, [laughs] I might consider loading up on some more Activision Blizzard if Bobby Kotick were to step down.
I got a lot of shares already, but hey, I think there's room for growth with new leadership, especially from where they are right now. Who knows, maybe before this week is over we will be discussing yet another new CEO on "The Five." I remain hopeful that a change is coming in the very near future.
Warren: I think...
Hall: Sorry guys. It's Monday. [laughs] I get that from Matt Frankel. On Mondays, Matt mutes. So I'm doing it too apparently.
Warren: [laughs] Lack of caffeine, Jason. [laughs]
Hall: That's probably what it is. I think that totally makes sense.
Bordelon: I think that's what's going on.
Hall: I'm just going to just toss in TPI Composites ticker TPIC. Just real quickly, TPI Composites reported earnings a few weeks back. It's been a tough year on and off for the stock.
The reason I'm concerned, so this is the company that announced as part of their earnings release that they had reached a strategic agreement with oh, goodness, Toby, help me out here.
Bordelon: What was, ah shoot. I'm blank here.
Hall: The lender, oh, goodness gracious. I'm drawing a blank. The payday lender of the business world.
Bordelon: The payday lender of the corporate world. I know what you're talking about.
Hall: I'm just really drawing a blank. But anyway, the short version is the company had a near mess with defaulting on their debt. Could have led to bankruptcy. The way they avoided bankruptcy was some really own risk terms on some debt at about an 11% interest rate. Which you think [laugh] about that today is just minded numbing.
Bordelon: I'm sorry, if you have to take out 11% that says a very profound statement about what lenders think of your viability.
Hall: Yeah, that means that you have basically one choice and you had to say yes. I mean, that's really essentially what that says. It really made me lose faith in management. Lost trust in management. This company built factories and they used those factories to build wind turbines. They know it's a very cyclical business. The long-term is growth, the here and now is lots of ups and downs so then you have to manage those cycles well. It's a high capital-intensive business. You require a lot of debt.
They knew going into it what they were getting into. To get that close to going bankrupt out of nowhere, it's just scary. It's really concerning, it definitely made me lose some faith in management. Maybe they could turn it around. I hope they can.
I continue to own the business because I think it's a wonderful business. I just think the knuckleheads and executive ROE need to get their capital allocation hats tightened on and start doing a better job there.