We cannot imagine an Apple without Steve Jobs.The two are so closely inter-linked that it is difficult to separate the founder from the company.
When the founder passes away, the company and hence the stock price are drastically affected. (as can be seen in Apple’s case )
There are many examples in the Indian context.The recent one being Amitabh Parekh of Parekh Aluminex.The stock has got hammered beyond shape after the unexpected demise of its charismatic founder.
If you cast an eye (not an evil one !) over your portfolio, you will find many companies which are closely interlinked with the founder.It is difficult to visualize that these companies can succeed and grow without them.
A sad but sobering thought.
4 replies on “A sad thought”
Hi Raoji,
It’s indeed sad that many corporates, specially family run businesses have poor succession planning.
In some cases, a good succession plan would mean that a huge dip in the share price is only temporary and is bound to reverse.
Would u think Parekh aluminex warrants a buy at the current levels ?
Best,
DV
Would wait for the management to settle in before considering the stock
Well, Raoji, I disagree with you. Steve Jobs died on Oct 05, 2011. Stock price was hovering around $370 then. Since then, it has risen to almost $700 (Sep 21, 2012) and fallen to $450 (as of today). So, it is not exactly the demise of Steve Jobs that is the reason of falling stock price (or the Market’s expectation from it). If you were to look at the stock price on Sep 21, 2012 (when it touched $700), would you have commented “When the founder passes away, the company and hence the stock price are drastically affected. (as can be seen in Apple’s case )” ?
Thanks for your detailed feedback.The stock price action need not be immediate.The company’s performance etc will be affected over quarters/years.For e.g., Disney’s decline started after Walt Disney passed away.In the Indian context, the Mafatlal group is a good example.