Typically, change in leadership in a business results in a dip (and sometimes a plummet) in the stock. The adjustment period can be lengthy, but rarely does a large impact change result in a bump in price per share - unless the new leadership wins the support of investors. There have been a few examples to the exception of this rule.
Since Yahoo's (NASDAQ:YHOO) newest CEO, Marissa Meyer, took office its stock price jumped from below $ 15 up to a maximum price of $ 23.09 in 35 days, the cumulative increase of over 50%. This has been attributed to Meyer's experience and vision for the company's future.
Meyer initiated a series of changes to simplify company processes and eliminate bureaucracy to allow for quick movement on consumer trends. For the current support team, she provided free lunch for the employees, but also required those employees of the Home Office report to the corporate office.
Change leadership concerns the driving forces, visions and processes that fuel large-scale transformation. It requires a great deal of planning and foresight to ensure control over the situation and that the number of problems associated with bigger changes, such as dissension, hemorrhaging of cash/capital, or a mass exodus of investors, doesn't happen. Change leadership as it applies to Yahoo, essentially dealt with putting an engine on the whole process, and making the company move faster, smarter, and more efficiently.
Another notable example is the Sears Holding Company (NASDAQ:SHLD). After announcing that Eddie Lampert would take the position of Chief Executive Officer, shares of the retailer rose 2.6 percent in pre-market trading. The company's new appointment followed on the heels of an update to its fourth quarter and full year earnings guidance for 2012. Despite a fall in same-store sales of 0.2 percent for the recent nine-week period, online sales increased by 20 percent and Sears now expects fourth-quarter earnings per share of $1.25 - $2.00, beating consensus estimates of $0.86.
Both these companies leveraged the previous experience of these new leaders in establishing momentum. Another company doing this is Soupman Inc (OTC:SOUP). SoupMan saw some success through partnerships. Its soups are sold in the main soup aisle of several large supermarket chains across the country alongside famous age-old soup brands, Campbell's and Progresso. Now, as it changes leadership, it could see even more.
The company recently announced the appointment of Lloyd Sugarman to the position of Chief Executive Officer. Sugarman, who brings a wealth of retail merchandising, restaurant operations and franchising experience, will continue the focus on expansion. In addition to the grocery store retail line, Sugarman intends to also leverage his 20 years of restaurant industry experience to expand the Company's franchise model.
Sugarman has led the move into partnership with Al's Famous New York Delicatessen & Restaurant. This equates into a multi-unit franchise deal in casinos throughout the United States and Canada. The next two locations are slated to open in the Mohegan Resorts Casino in Atlantic City and the Mohegan Sun at Pocono Downs in P.A.
Leaders must possess a combination of business acumen, creative thinking and incredible energy in order to lead an established management team and make direction changes. For Soupman, the casino entertainment venue is a smart move for the well-known soups. Robert Azinian operates over 50 restaurants, including 20 Johnny Rockets Hamburgers across the country in casinos and at City Walk at Universal Studios in California. He has been a franchisee in the Johnny Rockets system since 1990. This partnership is stands to profit both parties.
In today's business environment, it is often the case that companies cannot settle for incremental improvement. To stay competitive, they must periodically undergo entire transformations, sometimes within, sometimes at the top. Ideas and strategies about how to go about implementing a transformation are varied. What is certain, is that it takes the right person at the top to lead a company efficiently.
Another example of is Tesla Motor's (NASDAQ:TSLA) famed leader, Elon Musk. As far as visionary leadership goes, Musk is at the top of his game. In fact, the former PayPal founder made history last year when his company SpaceX launched the first commercial spacecraft in history to reach the International Space Station. Musk is now attempting to transform the auto industry with the electric-car.
As an investment, Tesla reported exceptional first-quarter earnings recently, and the stock has been on an incredible run since earnings, as well as the start of the year, having gained 51% and 148%. But more importantly, this is this is an opportunity to invest in a CEO, particularly one with Musk's track record.
The company's growing brand recognition, innovative technology, and disruptive retail strategy aren't reflected in its financial statements. Moreover, many investors continue to make the mistake of valuing Tesla by the same near-term benchmarks used for established automakers. However, investors willing to take a long-term approach and make a bet on Musk will likely see outsize gains if Musk is able to deliver on his promise of making Tesla the greatest automaker of the 21st century.
Clearly, all companies are different, even more so, as these companies are of different sizes and in different sectors. Sugarman and Musk are value creators and disruptive innovators within their respective industries. For investors, the trick is in recognizing the visionary CEOs ahead of the market. It's by keeping an eye to the future that these CEOs are able to create lasting shareholder value.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.