Monash IVF Group Ltd (ASX: MVF) shares are bouncing back strongly on Thursday.
In afternoon trade, the embattled fertility treatment company's shares are up 9% to 66 cents.
Though, this changes very little on a 12-month basis, with its shares still down by a sizeable 50%.
Why are Monash IVF shares rebounding today?
The catalyst for today's gain has been news that the company's CEO has decided to resign after two widely reported incidents at its clinics.
As a reminder, back in April, Monash IVF only confirmed that an incident had occurred at its Brisbane clinic after the media picked up on it. The company revealed that it has become aware of the incident in February, but decided not to inform the market.
It advised that "the embryo of one patient was incorrectly transferred to another patient resulting in the birth of a child."
At the time, the company stated that it did not "consider the incident as material to FY2025 financial performance." However, a little over a month later it certainly became material when management downgraded its earnings guidance.
Unfortunately for shareholders (and its patients), another incident happened this month and was announced by the company this week. It advised:
[A]n incident at the Clayton laboratory occurred on Thursday 5 June where a patient's own embryo was incorrectly transferred to that patient, contrary to the treatment plan which designated the transfer of an embryo of the patient's partner.
This appears to have been an incident too many for Monash IVF, with the company's board accepting the resignation of its CEO, Michael Knaap, this morning. It said:
The Board has today accepted Michael Knaap's resignation as Chief Executive Officer and Managing Director of Monash IVF Group. Mr. Knaap also resigned as a director of Monash IVF Group Limited. The Board acknowledges and respects his decision.
It seems that the market believes that a change of leadership may restore confidence in Monash IVF and support a recovery in its share price.
Should you invest?
The team at Macquarie Group Ltd (ASX: MQG) thinks that investors should be buying the dip.
In response to the second incident, the broker reaffirmed its outperform rating and $1.30 price target. This is approximately double its current share price.
Macquarie believes that the share price weakness has been an overreaction. Particularly given the medium-longer term tailwinds for the IVF industry. It said:
Despite incidents, we believe the share price has overreacted and valuation is attractive at current levels. We continue to see medium-longer term tailwinds for the IVF industry, with MVF well placed to capitalise on genetic testing growth (not captured in forecasts).
