An­other Turn­around, but in Which Di­rect ion?

CP Rail­way ex­pe­ri­ences shakeup, with more to come

Alberta Venture - - The Briefing -

>>> When Al­berta Ven­ture checked in on Cana­dian Pa­cific Rail­way last Septem­ber, we pub­lished a pro­file of de­part­ing CEO Hunter Har­ri­son. Since that story was writ­ten, the com­pany has done some ma­jor ren­o­va­tions. In Au­gust, Per­sh­ing Square Cap­i­tal Man­age­ment an­nounced it would sell its 9.8 mil­lion re­main­ing shares in the com­pany (worth al­most $2 bil­lion), abruptly end­ing the ac­tivist hedge fund’s dom­i­nance over the 136-year-old rail gi­ant.

Per­sh­ing Square, led by bil­lion­aire Bill Ack­man, who later re­signed from his board seat at CP, only owned 6.7 per cent of CP stock. But Ack­man was in­stru­men­tal in turn­ing CP around by oust­ing then-CEO Fred Green and pulling Har­ri­son out of re­tire­ment. It lead to a re­mark­able re­bound: in three years, prof­its tripled and the op­er­at­ing ra­tio in­creased by 20 per cent. The mar­ket read Ack­man’s exit as a pre­mo­ni­tion of mea­gre fu­ture prof­its, as stocks fell more than three per cent on the news.

Then, just 18 months after tak­ing the po­si­tion, CP’s chief fi­nan­cial of­fi­cer, Mark Erceg, stepped down. His re­place­ment, Nadeem Ve­lani, ar­rives after 15 years at com­peti­tor Cana­dian National Rail­way – like Har­ri­son, an­other CN im­port. CP is still a prof­itable com­pany, and its stock price has been climb­ing for most of 2016. But the glory days of the Har­ri­son-Ack­man turn­around are past. The stock price peaked in 2016 around $200, while the 2014 high was $241.

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