Talk about adding insult to injury.
On Monday after close of trading, for-profit educator Career Education
Ordinarily, when a CEO abruptly leaves office for no apparent reason, the stock plunges. For example, when Todd Nelson, the CEO of Career Education rival Apollo Group
That said, the intensity of the market's reaction to Larson's partial departure may have caught some people by surprise. 24 hours later (i.e., yesterday), the stock gave back two-thirds of its Tuesday gains as it declined more than 8%. One wonders: Was this simple profit taking?
Perhaps. But I've got my own theory on what happened yesterday. I think investors simply finished burning off their nervous energy from Tuesday's trading and found some time to sit and ponder the implications of the press release announcing Larson's partial departure -- such as the fact that he left the company without naming a permanent successor as CEO. Current lead director Robert Dowdell will serve as interim CEO while the company seeks a permanent replacement for Larson. But consider how the press release described the situation: "The board of directors is in the final stages of engaging a nationally recognized executive search firm to lead the search for a permanent CEO."
Parse that statement fully, and you'll see it translates roughly as "we're almost ready . to ask someone else ... to begin looking for a replacement." That suggests to me that Larson's departure was sudden, abrupt, unplanned -- choose the adjective that suits you best, but be aware that words like "calculated," "smooth," or "unpanicked" have no place in this sentence.
Simply put, something feels very wrong about the haste of Larson's departure, and the lack of any attempt to ensure a smooth transition to a new CEO. How wrong is "very wrong?" 8%, apparently, at the least.
Honest -- we had nothing to do with this one. But it is true that just days before Apollo's CEO departed, we had the opportunity to interview its former CEO, Todd Nelson. Wish we had thought to ask, "Apollo, Was It Something We Said?"
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Fool contributor Rich Smith does not own shares of any company named above.