Shares of Best Buy Co. (NYSE: BBY), after jumping by more than 5 percent in the minutes after the company said its CEO was quitting, plunged Tuesday to lows not seen in nearly three years.
Minutes after trading began in New York, Best Buy announced a mutual agreement by which Brian Dunn was resigning as chief of the Minneapolis-based bix-box retailer of consumer electronics. Mike Mikan, a member of the company's board, will take over as interim CEO, the company said. Best Buy's founder, Richard Schulze, will continue as chairman.
Analytsts welcomed the news.
The departure is long overdue, analyst Brian Sozzi told Dow Jones MarketWatch, adding that Dunn's fate was sealed after disappointing holiday sales caused the retailer to swing to a loss for the fourth quarter of 2011.
Markets seemed to agree, at least for 11 minutes. Following the unusually timed announcement -- public companies rarely announce major management changes during trading hours so as to avoid investor lawsuits -- shares rose by more than 5 percent from $22.60 each at 9:35 a.m. to a high of $23.72 at 9:46 a.m. Then the air went out of the heavy trading volume, which had succeeded in making Best Buy one of the top five traded issues on the New York Stock Exchange; the stock appeared to stabilize around $23.15 a share.
The new price level, however, was only a mirage. A selloff that was even more dramatic than the previous buying frenzy soon devolved into a price avalanche, and by 10:22 a.m., Best Buy had plummeted to $21.61, 4.38 percent lower than before the announcement.
At one point Tuesday the shares fell to 31 percent below their price on June 23, 2009, the day before Dunn took over as CEO, through Monday's close.
Part of that movement was the reversal of euphoria that immediately greeted the CEO resignation news.
Brian was never the big problem and the person who comes in will not be the big solution, David Strasser, an analyst at Janney Montgomery Scott, told Dow Jones Newswires. It's going to take some time to turn this company around. It's not going to happen overnight.
Another likely factor: continuation of a seven-day stock dump by institutional investors, which have been hiving off stakes in Best Buy since it announced fourth-quarter results last Thursday. The company admitted it was being outfoxed by online retailers and promised to strike back with an old-fashioned store overhaul, moving away from the big-box model by increasing our points of presence while decreasing our overall square footage.
Analysts and investors weren't impressed. Credit-rating firm Standard & Poor's put Best Buy's debt on a downgrade watch, warning it could soon be cutting the corporate bonds to junk status.
Shares of Best Buy recovered from intraday lows but then started sliding again in late afternoon, to $21.39, down 5.6 percent since Monday. The stock has lost more than 17 percent of value since last week's quarterly earnings announcement.