CALGARY— Shares in Calgary-based DIRTT Environmental Solutions Ltd. (TSX:DRT) plummeted nearly 18 per cent on Tuesday after it made the surprise announcement its board was replacing its 70-year-old founder as CEO.
A morning company press release presented the changes as part of succession planning with Mogens Smed staying on as executive chairman but on a conference call, Smed said he wasn’t part of the decision.
“I just found out about this on Friday,” he said in response to a financial analyst’s question.
“I’ve got absolutely no job description or anything yet so I haven’t really got a clue what it is that I’ll be doing, to be clear, OK? Hopefully that will get settled in the next couple of weeks.”
Stock in the office interior design and manufacturing company (TSX:DRT) closed at $5.53, down $1.21 or 17.95 per cent on Tuesday.
In its news release, DIRTT said Smed will focus on its network of sales partners, as well as key business development initiatives, reporting to the CEO. Smed said he “ain’t going away,” and will take on any task assigned by the board.
Lead director Steve Parry, whose title was previously chairman, wouldn’t be specific on the call about what led to the appointment of Michael Goldstein as interim CEO but stated it was not related to any financial reporting issues.
“We started to see some of what I would call cracks in the governance process in the company,” he said.
“This is a very proactive board and a good proactive board when it sees issues, rather than waiting for something that costs the shareholders, starts to act to put in place a process to make sure no loss does occur.”
He said the decision to replace Smed was made based on an internal board assessment of DIRTT’s capabilities, earning power, growth opportunities, governance and shareholder returns.
DIRTT also announced the appointment of Peter Henry as interim chief financial officer, replacing president and interim CFO Scott Jenkins.
In a later interview, Parry insisted the board is not trying to get rid of Smed. He said Smed was aware the changes were coming and knows what his new job is, suggesting his comment on the call was an “off the cuff remark.”
He added negative market reaction was unfortunate but he’s hopeful investors will eventually “absorb the information and … understand its positive implications.”
In a research note, Laurentian Bank analyst Elizabeth Johnston said the “abrupt changes to management and near-term uncertainty” are negative for the company.
Smed sold SMED International Inc., a manufacturer of customizable prefabricated building interiors, to Haworth, Inc. in 2000 for $250 million.
He co-founded DIRTT, a manufacturer of customizable prefabricated building interiors, in 2004. The name stands for Doing It Right This Time.