23andMe (NASDAQ:ME) is preparing for a major change at the executive level. Today, the firm announced that CFO Steven Schoch is planning to resign. Schoch had held the role of CFO since April 2018. Although this resignation will not take effect until Sept. 1, ME stock is already reacting to the news. Shares dropped in premarket trading and have not stopped falling since. As of this writing, ME is down 15% for the day.
ME stock has not performed well since its initial public offering (IPO) in June 2021. Despite rising 21% on its first trading day, the stock spent the ensuing year on a gradual downward trajectory. Now, shares are down more than 50% year-to-date (YTD) and more than 60% since their public debut.
Of course, 23andMe did surge earlier this month alongside fellow genomic biotech company Invitae (NYSE:NVTA). But both companies have been declining all this week, indicating that the rally is over for DNA stocks. Now, the sudden departure of a c-suite leader threatens to push ME down even more.
Let’s take a look at Schoch’s departure in context and what it means for 23andMe.
What This Means for ME Stock
Stocks slumping when a leader announces their departure is not a new phenomenon. However, it’s most common for shares to drop on a change in CEO. Investopedia notes:
“If a change in CEO is handled with care and the replacement is deemed a competent successor, then a company’s stock price shouldn’t be negatively impacted. Conversely, if the news of a departing CEO or of a new CEO is seen to be mishandled, a company’s stock price may drop.”
Does this logic apply to a CFO? In theory, yes, although a CFO often holds less power than a CEO. According to The Org, Schoch’s responsibilities included “all aspects of the financial operations of the company, including accounting and controls, financial planning and analysis, tax planning and compliance, as well as funding […] cash management and investor relations.”
While Schoch will be transitioning out of the role through Sept. 1, the company has already named Joseph Selsavage as interim CFO and accounting officer. Selsavage knows 23andME well, having served as CFO of its Lemonaid Health subsidiary.
23andMe has issued no statement on Schoch’s resignation and, as of now, there’s nothing to indicate that the move is the result of anything negative that could push ME stock down. Per MarketWatch, 23andMe says the departure “is not the result of any dispute or disagreement with the Company, including any matters relating to the Company’s accounting practices or financial reporting.”
Investors should also not that ME stock has been falling recently, so there are other factors at play. CEO Anne Wojcicki recently said that companies from both China and the U.K. were pulling ahead of 23andMe. That forecast does more to hurt shares than any leadership change.
All told, Schoch’s departure should not pose any ill, long-term effects. But that does not mean ME stock is a good bet, either.
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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.