Why is the IDP Education share price sinking 7% today?

IDP shares are deep in the red on Thursday…

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Key points

  • IDP Education shares are sinking on Thursday morning
  • This follows broad market weakness and news that its CEO has resigned
  • IDP's CEO will be stepping down in September after more than seven years in the role

The IDP Education Ltd (ASX: IEL) share price has come under significant pressure on Thursday.

In morning trade, the student placement and language testing company’s shares are down 7% to $23.30.

Why is the IDP share price sinking?

There have been a couple of catalysts for the weakness in the IDP share price on Thursday.

The first is broad market weakness following another poor night of trade on Wall Street. The other is news that the company’s CEO has resigned.

According to the release, IDP’s CEO and managing director, Andrew Barkla, will step down from his current role in September after more than seven years leading the company.

The release notes that during the past two years of disruption to the international education industry, IDP’s leadership team has continued to deliver on the company’s long-term transformation strategy and has added significant revenue through acquisitions while building its people resources across the global network.

With the industry now stabilising and borders reopening, Mr Barkla and the Board have agreed that now is the time for leadership transition.

And while Mr Barkla’s will be stepping down as CEO in September, he will be sticking around for a further 12 months in an advisory capacity to assist with key strategic projects. After which, the IDP Board intend to nominate him as a new non-executive director at its 2023 annual general meeting.

What now?

When the CEO of a growth company steps down it can spook investors. This is because they may fear that the resignation is a sign that the company’s growth runway is coming to an end.

After all, if the company was destined to double in size in the future, why would you not want to oversee this growth?

However, Mr Barkla appears to have dismissed this and remains positive on IDP’s future. He commented:

I am passionate about the opportunities that exist for IDP. It is a special Company with amazing people that deliver meaningful impact. Whilst I believe it is the right time for me to step down, I want to stay strongly connected to IDP so I can contribute to its ongoing evolution.

It was important to me that I worked with the Board and IDP’s leadership team to ensure we had successfully navigated the pandemic before this change was made. Orderly leadership transition is a hallmark of a well-managed business, so I want to make sure I assist the Board as our Directors work to secure the best possible successor for the role.

IDP will now undertake an extensive global search to identify a suitably qualified leader with exceptional skills and global experience in technology driven consumer businesses.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Idp Education Pty Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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