Another Turnaround, but in Which Direct ion?
CP Railway experiences shakeup, with more to come
>>> 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.