A sudden executive shuffle at DIRTT Environmental Solutions Ltd., one of Canada's promising growth companies, stunned investors early Tuesday, leading to a major selloff of its shares.
By lunchtime, DIRTT's stock had fallen 24 per cent after the board of directors replaced the company's co-founder and chief executive officer, Mogens Smed, and moved him into the role of executive chair. The board also removed DIRTT's president and interim chief financial officer.
An interim CEO, Michael Goldstein, has been hired, but there is no assurance he will stay long-term. A new interim CFO has also been brought on board, but only on a temporary three-to-six month contract.
On a conference call, board chair Steve Parry initially chalked up the shuffle to succession planning, but that narrative started to change – particularly after the company's co-founder spoke. "I just found out about this on Friday, so there is, I've got absolutely no job description or anything yet. … I haven't really got a clue what it is that I'm going to be doing, to be very clear," Mr. Smed said of his new role.
Asked about the reasoning for the switch, Mr. Parry ruled out financial problems. "It is not a financial reporting issue," he said. "I think the best analogy I can give is sort of like workplace health and safety. When you're seeing near-misses, when you see issues that are concerning, you should act before it becomes a problem. That's absolutely what happened here."
He also attributed the surprise change to "cracks in the governance process in the company."
The new CEO, Michael Goldstein, reiterated that the switch didn't stem from profit performance. "This is no turnaround. This is a great company. These changes were being made for proactive reasons," he said.
DIRTT stands for "doing it right this time," and the company specializes in pre-fabricated building interiors. Its success is tied to its ICE software, which lets clients experiment with interactive versions of their layouts – something the company calls "a video game for design." DIRTT went public in 2013 at $3 per share, and the stock ended 2017 at $6.74.