Medifast CEO Steps Down Amidst Barron's Inquiries

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Medifast's Executive Ranks Thin by Neil A. Martin

Highlighted companies: Medifast (MED)
Summary: Medifast announced Friday that CEO Bradley T. MacDonald will be stepping down. The weight-loss products manufacturer is facing a couple of issues unearthed by Barron's: the rejection of a study that had previously prompted a stock upsurge, and internet postings penned under a pseudonym by the company's top exec. A John Hopkins Weight Management Center study on the influence of the Medifast diet on diabetics has been the company's top marketing tool and key reason for the stock's success since mid-2005. An announcement of the study results last June caused the stock to rally to $21 in June of this year. But the results were discredited by Diabetes Care, journal of the American Diabetes Association, in September, and that rejection has yet to be disclosed publicly by Medifast. Medifast has been receiving repeated support on the Yahoo! Finance message board from an author named [e-mail]. MacDonald denied connection to this identity when asked by Barron's, but informed sources say otherwise. Following a Barron's probe the CEO was reprimanded, as management feared breach of "fair disclosure" rules. Yet as late as Dec. 29 another message appeared praising Medifast's 140% 2006 return in stock price. Louis Navellier of Navellier & Associates, the single largest institutional Medifast holder and a former regulator with the Federal Home Loan Bank Board, calls anonymous Internet postings by a CEO a "no-no." On Friday the stock dropped 6% to $11.60 following the management change announcement.
Related: Medifast Press Release, [e-mail] in action on Yahoo Finance, Medifast - Losing Weight in a Hurry, Medifast: Excessive Correction Following Another Stellar Quarter, Medifast Increases 2006 Forecast (MED)