Historical Analysis: Do Returning Founder CEOs Boost A Company's Stock Price?
Twitter Inc (NYSE: TWTR) and Pandora Media Inc (NYSE: P) are the latest companies hoping that a blast from the past can kick-start their businesses. Both companies are struggling with generating profits, and both have recently named founders of the company to the CEO position in an effort to turn things around.
According to Fundstrat analyst George Gianarikas, bringing back a founder as CEO has historically been a gamble for public companies.
“Our findings suggest that investing in a founder’s return as CEO has a mixed track record with a 1) win ratio below 50 percent, 2) average returns slightly below that of the S&P 500 total return index, 3) average returns slightly below sector comp, but 4) high returns when a founder makes a successful return,” Gianarikas explained.
It's No Sure Thing
Past examples of the successful return of founders to the CEO position include Steve Jobs’ return to Apple Inc. (NASDAQ: AAPL), Charles Schwab’s return to Charles Schwab Corp (NYSE: SCHW) and Larry Page’s return to Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG).
On the other hand, other founders have flopped when returning to the CEO role, including Jerry Yang’s return to Yahoo! Inc. (NASDAQ: YHOO), Mark Pincus’ return to Zynga Inc (NASDAQ: ZNGA) and Richard Hayne’s return to Urban Outfitters, Inc. (NASDAQ: URBN).
Disclosure: The author holds no position in the stocks mentioned.
Image Credit: Public Domain
Latest Ratings for TWTR
|Feb 2017||Cowen & Co.||Downgrades||Market Perform||Underperform|
|Feb 2017||Raymond James||Downgrades||Market Perform||Underperform|
|Feb 2017||Deutsche Bank||Downgrades||Buy||Hold|
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