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NEW YORK — Shares of H&R Block fell sharply Thursday after the CEO of the nation's largest tax preparation company resigned unexpectedly.
THE SPARK: Russ Smyth, who also held the title of president, left the company to become CEO of a private company in Chicago. H&R Block, based in Kansas City, Mo., named Alan Bennett, who served as interim CEO in 2007 and 2008, as his replacement.
THE BIG PICTURE: Smyth's resignation comes after two disappointing tax seasons and a struggle at H&R Block to compete for do-it-yourself tax preparation customers with its digital products.
The CEO's exit follows the departure of Chief Financial Officer Becky Schulman in April and the company's legal counsel, Brian Woram, last week.
THE ANALYSIS: Morgan Stanley analyst Vance H. Edelson said there appears to be disagreement across the management ranks — and between the CEO and the board — given the company's weak tax season. The high-level exits raise concern that the company's turnaround efforts "are presenting a challenge," or that its exposure to subprime mortgages remains an issue. He cited a report from earlier this week that suggested the company may face a $26 billion liability related to its now shuttered mortgage business, although he thinks the actual amount is much lower. "Any significant liability could jeopardize the company's share buyback program, which has been viewed as an investment positive," he wrote.
SHARE ACTION: Down $1.10, or 7 percent, to $14.38 in morning trading after earlier falling to a 52-week low of $13.44.
