McDonald's stock tumbles after CEO is fired for misconduct with employee

McDonald's stock falls sharply and insiders predict it might go further down, all thanks to the firing of their CEO Steve Easterbrook for having an affair with an employee

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McDonald's CEO Steve Easterbrook was fired for engaging in a consensual relationship with an employee which violates the companies policy and the board voted in majority to oust him following an internal review. The firing of the CEO has hurt the fast-food giant's stock market run as it opened down at 2.26% and insiders predict it would fall sharply further more.

The stock market value of McDonald's stands at $149 billion and has already slipped as much as 3.1% in the pre-market. Their rival fast-food giant Wendy's is gaining all the momentum and is up by up 2.2% and might increase its value until the dust of McDonald's firing settles down. Wendy's is now valued at $4.8 billion and is reaping the reward of Easterbrook's ouster.

Former McDonald's CEO Steve Easterbrook
Former McDonald's CEO Steve Easterbrook Reuters

Apart from Steve Easterbrook's firing, investors are also concerned about McDonald's pricey store renovations, delivery commission fees and value deals which has led to a strained relationship between McDonald's management and its US franchisees. The franchisees have formed an independent group to address their concerns and McDonald's has given out concessions, that has somewhat improved their relations. But investors are skeptical how long the concessions could go on, as the two are walking on a thin rope.

The new CEO of McDonald's Chris Kempczinski will have a larger role to play by keeping everything at the right place and bring back the company to its stock market glory by making both their franchisee owners and shareholders feel confident about their business model."This balance of relations with franchisees and shareholders, that can sometimes have differing objectives, will be paramount as Mr. Kempczinski begins his new role,'' Cowen analyst Andrew Charles wrote in a note.

Also, BTIG analyst Peter Saleh wrote in a note, "We are definitely surprised by the news and view Mr. Easterbrook's departure as a loss but also believe the company's strategy is on very solid footing and the McDonald's system is much more than just one man.'' The new CEO, Chris Kempczinski does not have any international experience in the global fast-food chain and was previously the President of Kraft International before coming to McDonald's.