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What's going on?
The chairman of automakers Renault, Nissan, and Mitsubishi Motors, Carlos Ghosn, was arrested on Monday over claims of serious misconduct and Renaults stock crumpled 10% on Monday to its lowest level in four years. Cest la vie.
What does this mean?
Ghosn has been accused of misusing Nissan property and under-reporting his personal salary by about $45 million. The man known as Le Cost Killer led turnarounds at Renault and Nissan and oversaw the alliance with Mitsubishi that created the worlds fourth-largest automobile group but Nissan is now planning to kill his chairmanship later this week (tweet this).
The 15% stake it holds in Renault means that Nissans shares will likely follow the French firm’s downwards when the Japanese stock market reopens on Tuesday. And Mitsubishis stock will probably experience some engine failure, too.
Why should I care?
For markets: Nobody likes a scandal.
Renault investors sold their stock as the news broke no surprise, as unexpected changes at the top arent typically well received. Investors like a level of consistency in order to be able to accurately value a stock and predict its future moves and this bombshell blew up Renaults cruise control. Nissan, Renault, and Mitsubishi arent only facing reputational damage from this scandal, but the loss of Ghosns once-superheroic leadership going forward.
The bigger picture: A shake-up, on the other hand…
Sometimes changes shake things up for the better. Telecom Italia recently acquired a new CEO its fourth in three years after activist investors pushed hard for changes. Investors expect the new guy to take a different tack from his predecessor and look to sell, rather than fix, the struggling parts of the business. The prospect of cash from the sales getting shared with investors led them to dial Telecom Italias stock up 4% on Monday.
Originally posted as part of the Finimize daily email.
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