Date
18 November 2018
Warren Buffett will turn 88 soon, but he is still very healthy. Photo: Reuters
Warren Buffett will turn 88 soon, but he is still very healthy. Photo: Reuters

Is a healthy CEO a must for investing in a company?

CEC International Holdings Ltd. (00759.HK), operator of Hong Kong’s popular snack food chain 759 Store, saw its share price surge 90 percent after the death of its founding chairman Lam Wai-chun triggered acquisition talks.

In an interview with the New York Times, meanwhile, Tesla’s founder Elon Musk admitted to taking pills in order to sleep. The revelation unnerved investors and dragged down the company’s share price by 9 percent on a single day.

Both instances highlight the fact that the health of the top leader of a listed firm could move the company’s share price in a sudden and substantial way.

So should investors take the health factor into account when investing? Well, yes and no.

First, the chances of the head of a listed company passing away or stepping down suddenly because of health reasons are very small.

In a year, there are only a few cases of health-related top management changes in the Hong Kong market, which has more than 2,000 listed companies.

As for the executive’s health condition, it’s something that is rather hard to determine.

American billionaire investor Warren Buffett rarely does exercises. Notwithstanding his junk-food diet, largely consisting of hamburgers, ice cream, candies and Coke, he will be 88 years old soon, and he is still very healthy.

So you just never know.

Nonetheless, if a company’s founder is very old, or seriously ill, and there is no proper succession plan in place, then investors should not ignore the risk.

This article appeared in the Hong Kong Economic Journal on Aug 20

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

RT/CG

Hong Kong Economic Journal columnist

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