Molina Healthcare shares spike after leadership shuffle

Molina Healthcare shares soared after the managed healthcare company announced that its chief executive and chief financial officer were being replaced in a leadership shakeup designed to bolster its financial performance.

The California-based company’s shares rose as much as 20 per cent before trimming the gains to trade more than 15 per cent higher on Tuesday, following the news that chief executive Dr J. Mario Molina and chief financial officer John Molina would be departing after more than two decades at the company founded by their father.

Both men will remain on the company’s board, while chief accounting officer Joseph White will step in as interim president and chief executive while a search for a permanent replacement for Dr Molina is conducted. Mr White will also take on the chief financial officer role to replace Mr Molina, the company said.

Dale Wolf, a current director of the company who was on Tuesday named non-executive chairman, said:

“In light of the Company’s disappointing financial performance, the Board has determined to change leadership in order to drive profitability through operational improvements. These changes represent targeted and deliberate actions to enhance the Company’s focus and improve its competitive position within the healthcare industry. With the industry in dynamic transition, the Board believes that now is the right time to bring in new leadership to capitalize on Molina’s strong franchise and the opportunities we see for sustained growth.”

Molina provides healthcare services to people receiving government assistance, including through the Medicare and Medicaid programmes.

Could it be that Molina Healthcare is clearing the path for a possible sale? Thomas Carroll and Mark Kelly of Stifel noted that the two men “were among the largest barriers to a sale of the company”.

However, they said they believed that “immediate attention will be directed at improving operations — a formidable endeavor — and that any near-term sale is unlikely given the current uncertainties at MOH coupled with a large number of solid assets currently available.”