(EnergySolutions story updated for closing price and volume)
SALT LAKE CITY, Utah (
) -- This week started as a banner one for the nuclear wenergy sector, with a Democratic president evincing support for the building of the first new nuclear power plants in three decades. However, nuclear power services firm
was ending the week with a hazardous share freefall, after an announcement in the wee hours of Friday morning that its CEO was abruptly departing.
Chairman and CEO Steve Creamer was instrumental in the founding of EnergySolutions and is a major shareholder of EnergySolutions stock. There are 88 million shares of the nuclear energy services company outstanding. Some 20 million of those shares were in play on Friday -- versus an average daily volume of 457,000 shares traded -- after the market was caught off guard by Creamer's sudden departure, and investors feared an apocalypse for EnergySolutions.
EnergySolutions held a conference call at 11 a.m. on Friday (perhaps unfortunately for them, during the exact same moment that the world was riveted by the
), during which the company said that the new CEO -- and former president Val Christensen -- was scheduled to take Creamer's place as CEO in 2010.
While EnergySolutions management indicated that the succession had been planned, there was no way to verify that was the case, as previous to the news of Creamer's abrupt departure, EnergySolution had not publicly spoken of this planned succession.
Dan Mannes, an analyst at Avondale Partners, said "no one saw this coming, and Creamer was very heavily associated with the company, a major shareholder, so that was the shocking part." Still, Mannes reasoned that if the succession had not been planned, Christensen most likely would have been named interim CEO of EnergySolutions -- as opposed to his appointment as permanent CEO -- while a search for a permanent replacement was conducted.
Most importantly, EnergySolutions assured analysts and investors on the call that Creamer's departure was not related to any accounting issues, customer issues, or corporate malfeasance. However, EnergySolutions management provided no reason for Creamer's sudden departure either.
What's more, EnergySolutions' former CFO announced his planned year-end departure from the company in November. With the sudden departure of the CEO Creamer, EnergySolutions' two top management slots have abruptly changed.
EnergySolutions management also said that Creamer has a two-year non-compete agreement in place, and went further, saying that Creamer had even agreed to extend the term of that non-compete. Creamer was not on the call.
Shares of EnergySolutions were down 18.5% at the close on Friday -- and that 18.5% drop was actually a sign that the call provided some confidence to the street and investors. EnergySolutions shares had plummeted by a significantly larger percentage earlier on Friday morning, before the call. EnergySolutions shares had been as low as $5.45 on Friday morning, while at the Friday close, the shares had recovered to $6.35, though still more than $1 below Thursday's closing price of $7.78.
Avondale Partners' analyst Mannes said it was possible to take away a few positives from the unexpected conference call. For one, EnergySolutions management used the conference call about the CEO departure to offer its 2010 guidance, ahead of next week's earnings, and that alleviated concerns about a negative event being part of the upcoming earnings.
What's more, the EnergySolutions guidance was more conservative than had been typical under Creamer's tenure, and the Avondale analyst read that as a potential sign that EnergySolutions was signaling a shift in its approach to guidance, and would be more conservative going forward. "They have been fairly aggressive in their estimates and haven't met, and it's been a frustrating stock as a result," Mannes said.
There was a range of opinion within the analyst community.
FBR Capital viewed the more conservative management guidance with a healthy dose of skepticism, in light of the abrupt departures. FBR downgraded EnergySolutions to underperform, saying it expected investors to "shoot first and ask questions later." The FBR analyst wrote, "Given that Creamer was the architect of EnergySolutions, we are puzzled by his departure at this time."
FBR cited concerns about fourth-quarter results; uncertainty about management's guidance for 2010, given that both the CFO and CEO are new to their positions and may take an ultra-conservative view; and uncertainty about the future strategy of EnergySolutions, in its downgrade from outperform to underperform.
-- Reported by Eric Rosenbaum in New York.
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