Orthofix Medical Inc. investors suffered their worst day in nearly 30 years on Tuesday, after the spine and orthopedics company fired three top executives “for cause.”
said following an investigation by independent legal counsel overseen by its independent directors, the board voted unanimously to terminate then-Chief Executive Keith Valentine, Chief Financial Officer John Bostjancic and Chief Legal Officer Patrick Keran, effective immediately.
“As a result of the investigation, the board determined that each of these executives engaged in repeated inappropriate and offensive conduct that violated multiple code of conduct requirements and was inconsistent with the company’s values and culture,” the company said in a statement.
The stock plummeted 30.2% to $13.01, which was the lowest close since Dec. 2, 2008. The stock, which went public in May 1992, suffered its biggest one-day percentage drop since the record 33.9% selloff on Oct. 17, 1995.
The selloff has shaved about $206.5 million off Orthofix’s market capitalization, bringing it down to about $478 million as of Tuesday’s close.
The company said the terminations won’t change its strategy, results of operations or previously filed financial statements.
Chairperson of the Board Catherine Burzik was appointed interim CEO, Corporate Controller Geoffrey Gillespie was named interim CFO and Chief Ethics and Compliance Officer Puja Leekha was named interim CLO, while the company searches for permanent successors to those roles.
“Orthofix’s core values are built around fostering, cultivating and preserving a culture that is respectful, and we do not condone harassing or inappropriate conduct or statements of any kind,” Burzik said.
“The board did not make these decisions lightly,” Burzik added. “We believe they are necessary to ensure our employees, investors, customers, and other stakeholders have confidence in the company’s leaders.”
Valentine had become CEO of Orthofix Medical when the merger with SeaSpine closed on Jan. 4, 2023. He was previously CEO of SeaSpine.
Bostjancic was also CFO of SeaSpine, and kept that role after the merger.
BTIG analyst Ryan Zimmerman followed the leadership change by downgrading Orthofix to neutral from buy. He said Valentine was a well-known entity in the spine market, so he’s worried about a potential business fallout and believes it’s best for investors to move to the sidelines.
“The collective value proposition of this is what drove our prior view, but with a lack of permanent leadership and the increased risk to the company coming from this update, we worry that competition will use this to win share away from Orthofix as well as talent from inside the combined company,” Zimmerman wrote in a note to clients.
He added that while he is unaware of any further legal fallout from this update, “our next worry would be what type of further entanglements come from this as a result.”
Orthofix’s stock has lost 36.6% year to date, while the S&P 500 index
has gained 16.2%.