Historically, Wall Street frowns at unpredictable executive turnover. Its exuberant reaction to General Electric’s abrupt change of chief executive is a notable exception.
GE’s shares soared as much as 16% in pre-market trading today (Oct. 1) after the company announced CEO John Flannery was ousted. The stock was up 12.7% an hour after the opening of markets in New York.
Investors, and the GE board, lost faith in the turnaround efforts of Flannery, who had only been on the job for a year. It’s an indication of how far GE’s stock has fallen from its Jack Welch glory days of the late 1990s, when the shares reached $51, that it now only takes $1.43 to move the shares 13%.
Flannery was charged with righting GE after its long, slow decline under Jeff Immelt (Welch’s successor), but the board grew impatient. It didn’t help Flannery’s case that the GE Power division had badly misjudged demand for its products, contributing to a $23 billion write down.
He’ll be replaced by H. Lawrence Culp Jr., a member of the GE board since April and former CEO of Danaher Corp., a technology conglomerate.
Wall Street’s enthusiasm over Flannery’s departure stands in sharp contrast to the market’s reactions to other recent CEO news. Pfizer shares barely budged after the drug giant announced the departure of CEO Ian Read, an orderly transition that will see him replaced by his COO at year-end.
Elon Musk, meanwhile, had investors breathing a sigh of relief that he will remain CEO of Tesla. After worries that Musk would be forced out by the US Securities & Exchange Commission over his tweeting a thinly planned idea to take Tesla private, the mercurial entrepreneur struck a deal that required him to resign as Tesla’s chair and pay $20 million but will let him him stay on as CEO. Tesla shared climbed 17% on the news.