A CFO's large personal investment, despite a significant subsequent stock price decline, indicates strong belief in a turnaround. Newell's strategy of cutting unprofitable product lines to boost profitability is being misread by the market as just falling revenue, creating a potential value opportunity.
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Most turnarounds fail. Instead of investing on the announcement, wait 12-24 months for early evidence in leading KPIs before they hit the bottom line. This improves your odds, as turnarounds that start working rarely revert. The probability gain is worth more than the initial upside you miss.
In a turnaround, a leader's most critical first step is restructuring their direct reports. McLaren's CEO replaced every key leader—CFO, HR, commercial, etc.—to create a unified group that could then drive cultural change down through their own departments.
Buffett capitalized on a 30% stock drop in United Healthcare following the CEO's tragic death and regulatory issues. He looked past the short-term crisis to the company's long-term fundamentals, demonstrating his principle of investing in strong companies when market sentiment is at its most fearful.
When a credible, external VC leads a follow-on round at what seems like a high price, it provides a strong signal of validation. This should prompt existing investors to overcome their anchoring bias and increase their own investment.
When pursuing a distressed company, understand the investors' intrinsic motivations. They often prioritize avoiding a public failure and protecting their reputation with LPs over recouping sunk capital. Frame the deal as a success story for them, not a fire sale.
During a stock downturn, Rhythm's CFO showed his team historical charts of successful biotech firms like Vertex and Regeneron that also endured long periods of low valuation. This tangible proof of long-term potential in a volatile industry served as a powerful tool to maintain employee morale and focus.
When Carvana's stock fell 90%+, Thrive evaluated it like a private portfolio company undergoing a restructure, focusing on operational improvements instead of the daily stock price. This private-market framework allowed them to see progress where the public market saw failure, giving them the conviction to double their position at a fraction of the cost.
When communicating with shareholders during a crisis, Bill Winters didn't just present a plan. He explained why he, as an outsider with a comfortable life, chose the challenging CEO role. This demonstrated personal conviction in the bank's underlying value, building credibility beyond spreadsheets.
A tender offer, where a company buys a large block of its stock in a set price range, signals higher conviction than a typical buyback program. It forces management to put a stake in the ground, indicating they believe the shares are significantly undervalued at a specific price.
Never accept 'we don't have the budget' at face value. CFOs often maintain discreet, unallocated funds for strategic opportunities. A powerful, data-backed business case can persuade the CFO to tap into these hidden reserves, even when department heads are unaware of them.
