Co-founder Mogens Smed has been removed as DIRTT Environmental Solution's CEO.Chris Bolin/The Globe and Mail
A sudden executive shuffle at DIRTT Environmental Solutions Ltd., one of Canada's promising growth companies, sparked a major sell-off of its shares as the board of directors struggled to calm investors.
On Tuesday, the first day of trading in 2018, DIRTT's shares plummeted 18 per cent after the board replaced the company's co-founder and chief executive officer, Mogens Smed, and moved him into the role of executive chair. The board also removed DIRTT's president and interim chief financial officer, who is no longer with the company.
An interim CEO, Michael Goldstein, has been hired, but there is no assurance he will stay long term.
A new interim CFO has also been brought on board, but only on a temporary three-to-six-month contract.
On a conference call early on Tuesday, board chair Steve Parry initially chalked up the shuffle to succession planning. That narrative eventually changed, particularly after the company's co-founder spoke.
"I just found out about this on Friday, so there is, I've got absolutely no job description or anything yet," Mr. Smed, the co-founder and former CEO, said of his new role.
"I haven't really got a clue what it is that I'm going to be doing, to be very clear."
In an interview later Tuesday, Mr. Parry, the chair, said the change was because of "governance reasons," adding that "it's very much like workplace safety."
"When you have a number of small events that occur … they signal that your systems aren't working quite properly," he said, adding the decision was not related to financial problems or any harassment issues.
Mr. Parry did not elaborate on the issues that contributed to the governance concerns, but earlier this year DIRTT's long-time CFO announced he would leave the company for personal reasons.
His replacement, a veteran accountant from Deloitte LLP, joined June 1, only to leave the company within four weeks.
The hole was then filled by the company's president, Scott Jenkins, who is now gone from the company after the executive shuffle.
Asked if the CFO situation contributed to the board's actions, Mr. Parry said: "That's an example of a governance process where you have to do better."
On the company's conference call Tuesday, the new CEO, Mr. Goldstein, reiterated that the switch didn't stem from profit performance. "This is no turnaround. This is a great company. These changes were being made for pro-active reasons," he said.
DIRTT stands for "doing it right this time," and the company specializes in prefabricated building interiors. Its success is tied to its ICE software, which lets clients experiment with interactive versions of their layouts – something the company calls "a video game for design." DIRTT went public in 2013 at $3 a share, and the stock ended 2017 at $6.74.
Lately, DIRTT has pushed into the health-care market by working on designs that help to stop the spread of infections, for one. Last quarter, the health-care segment contributed 20 per cent of the company's total revenues for the first time.
DIRTT last tapped public investors for fresh cash in 2015 when it raised $43-million to invest in its sales and marketing team as well as in ICE software development.
Mr. Goldstein, the new interim CEO, most recently served as acting CEO of Photon Control, which is listed on the TSX Venture Exchange and produces optical sensors and instruments to measure temperature and pressure. He previously ran Actuality Medical, a company that specializes in 3-D imaging devices for surgical and radiation oncology.
It isn't clear how long he will be staying with DIRTT. "There is a prospect for it being long term, and it's subject to seeing how things go," Mr. Parry, the board chair, said in the interview. "This is a company where culture is a critical part of their value-add," so any new senior hire "needs to be a great fit."
Mr. Smed, the co-founder, has vowed to stick around. "First of all, I ain't going away. I am the one – this was my idea," he said of DIRTT's business model. "Regardless of what I am doing, I'll be an integral part of this thing. I started it and I owe it to … all of our employees."
Tim Kiladze