Ad giant WPP's shares drop 5% after CEO and founder Sir Martin Sorrell quits
- WPP CEO Sir Martin Sorrell announced his resignation in a letter to staff on Saturday.
- Sorrell spent 33 years at the helm of the business but is leaving after an internal investigation into allegations of misconduct and misuse of assets.
- WPP shares fell 5% at the open in London but recovered slightly.
- Analyst says Sorrell's exit could lead to a breakup of WPP.
Shares in advertising giant WPP fell 5% at the open in London on Monday as investors reacted to the departure of long-time CEO Sir Martin Sorrell.
Sorrell told staff in a letter on Saturday that he was leaving the advertising holding company. It emerged at the start of the month that he was facing an internal investigation over allegations of misconduct and misuse of company assets.Sorrell said in a letter to staff that the "current disruption" was "putting too much unnecessary pressure on the business."
WPP shares fell 5% at the open in London on Monday but quickly made back some ground to trade down 2.5% after 20 minutes of trade:
Liberum analyst Ian Whittaker said in a note on Monday morning that Sorrell "was the powerhouse behind WPP's rise over the past 30+ years into what could be argued was the world's largest advertising group."
Whittaker said Sorrell's exit raises the prospect of a breakup of the empire he built.
"Sir Martin Sorrell's resignation as CEO of WPP will raise speculation about the future of the group," Whittaker and his team wrote."We think there is a significant possibility that WPP will now sell its Data Investment i.e. Market Research unit, and possibly PR, but that the rest of the group will be kept."
Sorrell has not signed a "non-compete" clause as part of his exit deal, meaning he is theoretically free to start a rival ad business to compete against WPP.
But Whittaker said: "We would not read too much into this given Sir Martin's age but, more importantly, that WPP is his creation and he would not want to do anything that would be seen as damaging the company. Sir Martin still owns c.2% of the shares."