Avigilon Analyst's Theory On Ex-Execs: "Road to Riches"By John Honovich, Published Jun 23, 2014, 12:00am EDT
Avigilon's stock tumbled after their CFO departed, a culmination of 4 executives out in half a year. Many investors and financial press commentators cited 'management turnover' as a concern.
Now, an Avigilon analyst has an intriguing new theory about why these executives were leaving and what Avigilon's CEO prefers.
"Road to Riches"
Here's the theory from Robin Manson-Hing [link no longer available], Research Associate at CIBC World Markets, forwarded to us by an investor:
"When CFO Brad Bardua joined Jan 2012, neither the company nor the employees joining figured they would see $30 stock prices so quickly. The road to riches came so quickly for them that they were in a position to leave earlier than expected (despite Vancouver living costs!). I believe this is the primary reason for the head of marketing (Keith Marrett), director of hardware development (Mike Neufield), HDSM System Architect, VP of engineering and perhaps even the previous COO leaving. All of these guys left to no new job. When speaking to Alex [CEO] I get the feeling that he has more confidence in the work ethic, talent and drive of executives at the Dallas office than that of Vancouver (who would have guessed!) and that an increasing number of these senior execs will come out of Dallas." [Emphasis Added IPVM]
On the other hand, when people leave to no new job, it is frequently because they have been forced out / fired.
"When Bardua joined at the start of 2012 he had a salary of $180K with options that were worthless as the share price was under the IPO and exercise price of $4.50.
At a stock price of $30 at the time his job was posted on Caldwell partners website, his vested share options (the last set of which would have vested in April 2014), acquired shares, salary and bonuses would have totaled close to $3 million gross."
This theory shifts the emphasis from potential internal concerns / irregularities to questions about the former executive's character.
Sales Takes Over
The power shift inside Avigilon to the sales team (i.e., the Dallas office) is especially notable. This was fairly clear when the VP of Sales ascended to COO (i.e., when the Vancouver based Exec VP of Operations 'left' or was pushed out).
What will be interesting to see is whether the hard charging sales organization's culture and tactics will adapt well to the rest of the organization (who allegedly have lower work ethic, talent and drive).
CEO Meeting with Investors
Over the past month, Avigilon's CEO has been flying out to meet with various investors and analysts. The stock price indicates that he is doing a good job of convincing them. After bottoming out under $19 per share, the stock price has rebounded to $23+. Though this is not all the way back to the $26 level before the CFO exit, it has increased significantly.
Whether or not this theory about the outgoing execs is true (we are skeptical), this points to Avigilon rallying around its increasingly powerful sales organization, who has definitely delivered the revenue growth powering their stock valuation, but will now be charged with the more challenging task of shaping the entire company.
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