WASHINGTON — Shares in Global Eagle Entertainment took a nosedive Tuesday (Feb. 21) after the in-flight connectivity stalwart disclosed the abrupt departures of its CEO and CFO.
Tuesday’s developments were the latest turbulence for a sector that saw another of its heavyweights, Panasonic Avionics, cut ties with its CEO and CFO earlier this month — the same day it disclosed it was being investigated by the U.S. Justice Department and Securities and Exchange Commission for possible violations of corruption and securities-related laws.
Golden Eagle’s shares on the NASDAQ fell nearly 28 percent Tuesday, up slightly from the day’s low. The stock closed at $4.48 a share, down 60 percent from its 52-week high.
Jeff Leddy, who has served on Global Eagle’s board since 2013, was named chief executive Tuesday, replacing Dave Davis who resigned as board director and CEO on Monday. Tom Severson resigned as Global Eagle’s CFO the same day.
As Global Eagle’s share price fell amid heavy trading, three law firms — Pomerantz LLP, Levi & Korsinsky LLP and Johnson & Weaver, LLP — announced that they are investigating whether Global Eagle has engaged in securities fraud or other unlawful business practices.
Global Eagle did not specify why the two executives left beyond saying in a press release Tuesday morning that Davis has resigned “to pursue other endeavors.” In a filing the same day with the U.S. Securities and Exchange Commission, Global Eagle said that the departures “are not due to any disagreement with the Company.”
Global Eagle has grown to become one of the top providers of satellite-based in-flight entertainment and connectivity services to the aviation sector, and has a vested stake in maritime and remote connectivity through its acquisition of EMC last May.
In addition to being named CEO, Leddy will also serve as principal financial officer until Global Eagle hires a new CFO. Leddy founded Hughes Telematics Inc., which Verizon purchased in July 2012 for a total of $612 million and renamed Verizon Telematics.
Global Eagle updated its guidance for 2016 revenues “to be at or near the low end of its prior guidance range of $530-538 million.” Global Eagle’s full year 2016 revenue numbers aren’t finalized and still need to be audited.
Global Eagle told the SEC that it will probably miss the agency’s March 16 deadline for submitting the company’s annual 10-K report for the fiscal year ended Dec. 31. The company said the added complexity of acquiring EMC, its CFO departure and its need to complete “additional financial-closing procedures associated with the Company’s material weaknesses in internal control over its financial reporting” are necessitating more time.
Davis is leaving Global Eagle with a separation agreement worth $1.1 million, and will receive a $50,000 monthly fee from the company for advisory and consulting services as an independent contractor for three months. He will also receive any full year bonus he would have received for the 2016 performance year had he remained employed with the company through the bonus’ payment date.
Severson’s separation agreement following resignation includes severance pay equal to if Global Eagle “had terminated his employment without cause.”