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General Electric stock surges after the conglomerate gives its CEO the boot after 14 months. The Hustle Sponsored by GE stock temporarily soars after CEO, John Flannery, is ousted Yesterday, General Electric unexpectedly terminated their CEO of 14 months, John...
By: Wes Schlagenhauf
October 2, 2018
General Electric stock surges after the conglomerate gives its CEO the boot after 14 months.
GE stock temporarily soars after CEO, John Flannery, is ousted
Yesterday, General Electric unexpectedly terminated their CEO of 14 months, John Flannery, and replaced him with Larry Culp, the first “outside” chief in the company’s 126-year history.
At first blush, it seems like yet another hitch in a terrible year for the beleaguered energy giant — but the news actually sent GE stock soaring by as much as 16%.
Turns out, fired CEOs are good for stock
Wall Street isn’t typically a big fan of being blindsided by corporate shake-ups… with some exceptions.
Historically, studies have shown that when a business isn’t performing so hot, an ousting like Flannery’s gives risk-tolerant investors a renewed sense of hope. As a result, stock goes up.
This “pop” usually doesn’t last long, though: Investors soon realize that a new CEO is often just a Band-Aid solution for much deeper issues.
When the scandal-ridden pharma company, Valeant, replaced its CEO in 2016, stock shot up 14%, but quickly flatlined. Likewise, when Dick Costolo quit as Twitter’s CEO in ’15, an 8% temporary increase was followed by a multi-year stagnation.
GE has bigger problems than an ineffective CEO
The company has been in a long, slow decline since its heyday in the ’90s, when stock hit $51 per share under CEO Jack Welch.
Jeff Immelt, who succeeded Welch, led GE through years of “poorly timed deals and needless complexity” — all of which were inherited by Flannery when he took over the reigns in August 2017.
In 2018 alone, GE stock has fallen by 33%, and the company announced it will “fall short” of its 2018 profit projections due to a “weaker performance” than expected in its power division.
Ladies and gents, Larry Culp to the plate
If there’s any silver lining to this, it’s that the new guy, Larry Culp, isn’t like the others.
GE has always hired its CEOs from the inside; Culp comes from the technology giant, Danaher, which he grew from $9.7B to $50B in market cap in his 14-year helm as CEO.
Let’s hope he rights the ship — otherwise, he’ll end up just as Culp-able as the others in GE’s fall from grace.
But can he fix the Wi-Fi on my smart oven?
Husky Energy offers to buy MEG Energy for $4.9B USD
Calgary-based Husky Energy made an offer to take over major Canadian oil sands producer MEG Energy for $2.6B USD in a cash-and-stock deal that would also assume MEG’s debt, putting the overall “enterprise value” of the transaction at $4.9B.
The move sets up a battle between a Canadian oil company linked to prominent Hong Kong billionaire Li Ka-Shing, and a Chinese energy giant (Cnooc) who owns a 12% stake in MEG.
We got a battle raging for Canada’s oil sands
And for good reason -- when it comes to petrol huntin’, Canada’s oil sands are among the utmost premiere crude production hubs in the world. Combined, the two oil giants produce around 286k barrels a day from oil sands.
Bloomberg reports that if the board and shareholders of MEG accept Husky’s bid, the 2 companies would produce more than 410k barrels of global oil equivalent every day.
But MEG’s board of directors has remained cagey
While MEG declined to comment, Husky CEO Rob Peabody said the company already presented a takeover settlement to MEG this summer, but its offer was rejected.
Now, Peabody is set to travel to Toronto, Montreal, Boston, and New York over the next 2 weeks to visit with MEG’S shareholders and bring the deal on home.
According to Husky’s press release, the terms offer MEG a price 37% higher than the company’s most recent closing price, and would be Husky’s largest-ever takeover.
California’s public businesses must invite women into the boys’ boardroom -- or pay
California became the first state in the country to require public corporations to have women on their boards after Gov. Jerry Brown signed the bill into law on Sunday.
Taking a page out of Europe’s gender-parity playbook, male-monopolized companies must now let women into their corporate clubhouses by 2021 or face pricey penalties.
Norway or the highway
Gender diversity requirements are common in Europe: 12 European countries require at least 30% female board member representation.
Now, California companies with 5 board members must have at least 2 women, and companies with 6+ members must have 3 women.
The gender-equalizing policy seems to be working so far: The percentage of women on Norwegian corporate boards doubled after Norway passed a law requiring female board representation.
Sexism just got expensive
Hundreds of California companies have all-male boards -- including 377 on the Russell 3000 stock index (which represents America’s 3k largest stocks).
If any of these corporations fail to get women at the table by 2021, they will pay a $100k fine (and potentially $300k for a 2nd offense).
The controversial law could still be struck down as unconstitutional -- for discriminating on the basis of gender -- by the courts. But if the law is implemented according to plan, 684 women will have to fill all the boards seats across the Russell 3000 by 2021.
It’s still uncool to stay in school: Applications to MBA programs fell 7% this year
Last year, we wrote about how budding business humans were o-v-e-r shelling out wads of cash for an MBA degree.
And according to a new survey from the Graduate Management Admission Council, the streak has continued for a 4th straight year: Business school applications fell 7% in 2018.
Same story, different year
Once a prerequisite for climbing the ranks to a corner office at corporate, the business degree has lost prominence among a new generation of students who are seeking out shorter, more specialized degrees.
There’s another reason at play: International students, who have historically served as a solid market for US business schools, are facing taller hurdles with work visas, and their enrollment has seen a 11% YoY decline.
This time around, even the Ivys are feelin’ the pinch
Up until now, hallmark business schools like Harvard and Wharton School of Business seemed immune to declining applications (top-tier schools received more than half of all business-school applications in 2017).
But, for the first time in nearly a decade, they were hit with the same mounting disinterest that less prestigious programs have felt since the word “startup” was invented: Harvard apps are down 4.5% from last year, and Wharton’s, 6.7%.
It’s like coffee: There’s big batch, and then there’s pour-over.
Founded just 2 years ago, Burrow is rethinking what it means to take-a-load off with their line of customizable modern furniture.
As feature-chasers, we’re impressed.
There’s plenty of reasons to worship Burrow furniture, from its thoughtful design, industry-leading durability, commitment to sustainable materials, built-in USB port, and no-tool assembly -- but the thing that sold us?
It’s furniture delivered to your door… for free
Say goodbye to borrowing your buddy’s truck to pick up a couch from the shady furniture store 20 miles away. Every piece of Burrow furniture is delivered to your door for free -- cutting out expensive markups in the process.
Plus, it’s delivered in boxes. When it’s time to move, your furniture packs down into a few easy-to-assemble pieces. No heavy lifting, no damage in transit, and no more arguments on how best to turn the corner (PIVOT!) -- just furniture that moves with you and lasts a lifetime.
But hey, sitting is believing. Better yet, their Fall Sale is happening now. Use the code FALL18 at checkout to get up to $500 off your order.
Note: These are not advertisements or affiliate links. The Toolbox section is where we write about products that we truly love and have used for starting/growing our business.
The Messy Middle: A field guide for the part of entrepreneurship no one talks about
Friend of The Hustle Scott Belsky’s new book The Messy Middle is officially one of our favorite reads on entrepreneurship.
Why? Because it tackles the unglamorous stage that startup success stories often gloss over: After the excitement of launching a new idea fades and the end is nowhere in sight.
As an early-stage investor in companies like Uber and Pinterest, founder of creative network Behance, and Venture Partner at VC firm Benchmark, Belsky knows firsthand that starting a business isn’t the hardest part -- it’s running one.
Featuring learnings from Belsky and a host of other leaders, this book is about how to put your head down and “endure” when no one else knows (or cares) who you are.
It’s about keeping teams motivated and focused on your vision in the face of uncertainty.
It’s about sharpening your edge as you grow, not losing it.
A few of our favorite takeaways:
Don’t wait until “the last mile” to focus on “the first mile” (onboarding, copy, product tour) of the customer’s experience.
“The only ‘sustainable competitive advantage’ in business is self-awareness.”
“Insecurity work” (checking analytics, what people are saying on Twitter, team progress on projects) may make you feel better, but it’s not a replacement for getting sh*t done.
These just scratch the surface, and the entire book is brimming with quotable, actionable mantras for current and aspiring founders alike. We highly recommend giving it a read.