High-growth stocks have taken it on the chin for months now, and investors' patience is starting to wane. For electronic signature pioneer DocuSign (DOCU 1.56%), a drop of more than 80% in its stock price since its highs almost a year ago finally led its board of directors to take aggressive action on Tuesday morning. The favorable reaction the move got from shareholders could spur similar decisions from other high-growth tech companies.
Effective immediately, Dan Springer has left his role as DocuSign's former CEO. With the company announcing that the executive "agreed to step aside," DocuSign has indicated that it's no longer willing to wait for a slower turnaround. Instead, it will seek a superior strategy to move into what it sees as its next growth phase. The stock rose in response and was up almost 4% shortly before noon ET on Tuesday.
A new captain at the helm
DocuSign's board has already engaged a specialist to help lead a national executive search to help with succession planning and finding a new CEO. The idea will be to find someone who can take DocuSign beyond its best-known e-signature product and bolster its position in offering a wider range of document management services.
But don't make the mistake of thinking DocuSign will be in a holding pattern until the search is complete. Board chair Maggie Wilderotter will be interim CEO, and the longtime former Frontier Communications (NASDAQ: FYBR) chief executive has a ton of leadership experience. In addition to her running Frontier for more than a decade, Wilderotter has served in director positions on the boards of well-known companies like Costco Wholesale (NASDAQ: COST), Procter & Gamble (NYSE: PG), and Lyft (NASDAQ: LYFT). She has also served as a senior advisor to identity-tech company Okta (NASDAQ: OKTA), among others.
The final straw
Springer's departure comes less than two weeks after DocuSign saw its stock plunge almost 25% following the release of its first-quarter results. Despite year-over-year gains of 25% in sales and 16% in billings, DocuSign's growth continued to slow considerably from previous periods. Losses widened, and even after adjusting for stock-based compensation and other extraordinary items, adjusted earnings fell short of what investors had wanted to see.
Interestingly, Springer spent a lot of time on the conference call talking about the team of leaders he had assembled. Between Steve Shute as worldwide field operations president, Inhi Cho Suh as president of product and technology, Jim Shaughnessy as chief legal officer, and Jennifer Christie as chief people officer, Springer believed he had a team he could work with to move forward.
Now, though, Wilderotter will work with that senior executive team to boost execution across the company. As DocuSign emphasizes profitability, Wilderotter expects to keep unlocking the power of the Agreement Cloud business model to stoke future growth.
Are other top tech leaders on the block?
The natural question is whether other high-growth tech companies will come to the same conclusion and make big executive changes. The answer depends largely on which types of companies you're looking at.
On one hand, many tech stocks that have taken big hits are led by founders who have retained sizable stakes in their businesses. It'd be truly shocking to see founder/leaders like Zoom Video Communications' Eric Yuan, Zscaler's Jay Chaudhry, or Tobi Lütke of Shopify step away from their leadership roles.
For other stocks that are struggling to find direction after the COVID-19 pandemic turbocharged their businesses only to leave their growth engines vapor-locked in the reopening, the answer is less clear. Interactive fitness specialist Peloton Interactive (PTON 2.62%) answered activist investors by replacing co-founder John Foley with new CEO Barry McCarthy, who came out of retirement after having served as Spotify's and Netflix's CFO in order to to lead the stationary bike maker forward.
If other companies can't convince their key stakeholders that their business models are still intact despite huge stock declines, then investors could see more departures like Springer's. The longer the bear market lasts, moreover, the more likely further changes in the C-suite could be coming down the road.
