Shock resignation of owner – is it an opportunity?

Just three weeks after the resignation of well-regarded CFO Jenny Macdonald, CEO Greg Ellis’s resignation at REA Group (ASX: REA), the operator of, comes as a shock.

REA Group is a digital advertising business focused in real estate. REA’s services include online advertising of residential and commercial properties, online display advertising, website development services and provision of property market related information to customers and consumers. REA also aims to deliver online advertising solutions through the sites to help real estate agents sell or rent properties. REA operates 13 websites in Australia, Europe and Hong Kong.

REA Group is 61.6% owned by News Corporation (ASX: NWS), and contributes a significant amount of value to the group following its recent listing. Net profit after tax for REA Group has more than doubled in three years, rising to $109.7 million in 2013 from $49.4 million in 2009.

In what may only be described as a bad day for online internet-based businesses, REA Group shares fell 8.46% to $37.10, while  online travel business Wotif (ASX: WTF) plummeted in early trade to be down 28% at 10:30 AEDT, after flagging a lower first half profit and warning of a subdued outlook. Some other players in this space are Carsales (ASX: CRZ) and Seek (ASX: SEK).

Despite rumors of friction with Chairman Hamish McLennan, Mr Ellis stated that current success would not have been achieved without his contribution. Mr Ellis did not say what job he is looking to take up once the new CEO at REA Group had been found.

Foolish takeaway

Despite the recent exodus of senior personnel, there appears to be no great cause for alarm as Mr Ellis appears to be taking on a unique opportunity at another company and will remain as CEO until a successor is found. Assurances were also provided that the business was on track to deliver against its strategy in fiscal 2014.

In my opinion, this is a completely different scenario to Wotif’s announcement today, where aspersions were cast over profits going forward. REA Group should be kept on the watch list for a potential purchase.

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Motley Fool contributor Mark Woodruff does not own shares in any of the companies mentioned in this article.

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