CECO, a for-profit education stock, had a sudden price drop of more than 60% last week. Two pieces of news are related to the price drop: one is the CEO's resignation and the other is the bad news in Q3 earnings. But the company did not yet disclose the exact reason why the CEO resigned.
I think this could make an interesting case study, for both asset pricing and corporate finance. I am wondering which bad news contributes more to the price drop and how they interact with each other. Does the news of the CEO's resignation make the bad news of earning look even worse or is it considered (by the investors) a relatively good news to pull back the stock price?
If it was the former case, why would the company choose to announce such news at this time (earning announcement season)? Was there an agreement between the CEO and the company? Or was it a revenge from the CEO if it was a forced turn-over?
If it was the latter case, we may be able to find some evidence of the CEO's bad performance from the past history. I doubt this explanation because I watched this stock a while ago and found it performed quite well. This news is quite a surprise to me. Although I am aware of the regulatory uncertainty of the for-profit eduction industry, I do not think this concern is big enough to account for the huge price shock.
Let's keep an eye on CECO and see what happened next.
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