ExOne announces new CEO, what does the share price tell us?

Yesterday we published an article on the recent share price movements for industrial 3D printing enterprise The ExOne Company.

Now, the North Huntingdon PA headquartered manufacturer has made an announcement that may explain the increased trading volumes seen in the company’s stock.

ExOne’s current CEO, James L. McCarley, will, “be leaving the Company to pursue other interests and opportunities effective immediately.”

Taking on the ExOne CEO position is S. Kent Rockwell. Rockwell’s most recent job at ExOne was as Executive Chairman, however he previously served as CEO from January 1, 2013 until August 19, 2016. He has been involved with the company since 2007 as an investor and executive.

On the new appointment Rockwell said, “On behalf of our Board and management team, I would like to thank Jim for his efforts and wish him all the best in his future endeavors.”

What does the share price movement tell us?

It may be tempting to make assumptions about the prospects of a company based upon the markets reaction to the new CEO. If the share price increases, it could be argued that the incomer is viewed as likely to have a positive effect – and vice versa.

However, research indicates that such a conclusion may be overly simplistic. In the Harvard Business Review, James M. Citrin, an executive recruiter who leads Spencer Stuart‘s North American Board & CEO Practice, writes,

“We examined the short- and long-term share-price performance of 314 companies that named new CEOs from 2004 to 2009. Of the 49% of companies that saw a first-day rise, just over half—55%—also experienced a long-term gain. And of the 49% of companies that saw a first-day drop, about the same proportion—59%—experienced a long-term gain. (For the remaining 2% of companies, share price on the day of the appointment remained flat.)”

In the same article Citrin explains, “When the market’s reaction to the CEO news is dramatic, however, a surprising relationship comes into play. Of the 20 companies whose stock popped 5% or more upon the announcement, only 40% sustained a rise over the course of the CEO’s tenure—but of the 14 companies whose stock plunged 5% or more upon the announcement, 79% experienced a long-term gain.”

Looking at the share price of two major 3D printing enterprises, and how the market responded to a change in CEO provides the following information.

Vyomesh Joshi was appointed CEO of 3D Systems on April 4, 2016. The share price of 3D Systems was $15.12 just before the announcement, and increased by 4.63% immediately after. When Stratasys announced Ilan Levin as CEO in June 2016 the share price went up by 1.79%.

More recently, Stratasys announced that CEO Ilan Levin would be replaced in the interim by Elan Jaglom. The share price of Stratasys saw a 0.25% decrease.

For ExOne, the share price movement between the announcement of Rockwell after markets closed yesterday and today is a 1.87% decrease. Whether the longer term prospects of ExOne can be forecast with this figure, or the higher 5 day gain of 22%, is a question that ventures into the realm of crystal ball gazing.

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