Medifast Inc. (NUSE:MED) shares fell by more than 14% today as news surfaced that the firm’s acting Chief Financial Officer, Edward Powers, planned to resign on or before January 4. The executive said he was resigning in order to pursue interests outside of the company.
The news was broken by The Wall Street Journal earlier today. The firm’s shares opened today at $28.59, but have since fallen steadily. At time of writing, the firm’s shares stands at around $25.34.The magnitude of the fall is probably due to the unstable nature of management at the firm.
Powers is the second CFO to leave the company in less than two months. His predecessor, Brendan Connors, resigned on the 13th November. He also asserted that his reason for leaving was the pursuit of other interests. He had held the job for about two and a half years.
Medifast Inc. (NYSE:MED) is a nutrition and weight loss company based in Maryland. The market value of the company showed a year to date growth rate of 92% through Christmas day. The resignation of the firm’s CFO will more than likely leave a dent in investor’s 2012 gains.
Medifast Inc. (NYSE:MED) offers weight loss programs through several subsidiaries including Take Shape For Life, Jason Properties, Seven Crondall, Jason Enterprises, and Jason Pharmaceuticals. The firm sells its products under these brand names, as well as under the name Medifast.
The firm’s Jason Pharmaceuticals unit paid a fine of $3.7 million in September after making what a court found to be scientifically unsupported claims about one of its products. That fine had been anticipated by the Pharmaceuticals division, and was also anticipated by investors, after a company announcement.
The firm was performing extraordinarily well earlier this year, particularly after announcing better than expected second quarter earnings in July. Analysts decided later on in 2012 that the firm may not have the growth potential previously postulated. The firm’s stock was cut from buy to hold by more than one analyst.
Investors in Medifast Inc. (NYSE:MED) will hope that the departure of two financial officers in less than two months is a symptom, not a problem. Any problem associated with the firm that might cause the resignation of two CFOs in quick succession would be detrimental to its prospects.
After the resignation of Connors in November, the company announced the hiring of an executive recruitment agency in order to find a replacement for the executive. That recruiter’s job has more than likely become more difficult in the wake of today’s news.
The real effect of today’s resignation may not hit Medifast Inc. (NYSE:MED) until later in the week. Trading on the market is sluggish today as many remain on Christmas break. When the full complement of traders returns, however, it will be old news.
That is probably one of the motivations behind today’s announcement, and many other announcements we will hear int he coming days. Few people listen comprehensively to the news over the holidays, and once a story is old it’s not a big deal anymore.
This doesn’t always work of course, just ask Zynga Inc (NASDAQ:ZNGA) executives.