Embattled education provider Vocation Ltd (ASX: VET) ended last week on a positive note after its shares skyrocketed as much as 48% on Friday, before finishing the session up 28% at 16 cents. Investors shouldn't forget that the stock also surged 58.2% on Thursday, giving the stock a total 102.5% gain for the week.
So What: Vocation has been the centre of controversy for the better part of six months. To summarise the controversial events, the company lost nearly $20 million of key funding from the Victorian government which resulted in:
- Numerous profit downgrades
- The resignation of CEO Mark Hutchinson (which will take effect from 1 May)
- Heavy pressure from its banking syndicate, made up of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB)
- A number of class actions being launched against it, with its shares having plummeted by as much as 98% at their lowest point
- A strategic review was undertaken which led to the sale of many of its businesses, allowing it to reduce its debt considerably
After months of controversy shareholders finally received some more positive news on Thursday last week. The company stated that it was promoting its current Chief Financial Officer (CFO), Stewart Cummins, to the position of Chief Executive Officer.
As highlighted by The Australian newspaper, Mr Cummins has developed a strong reputation for his involvement in the turnaround of a number of troubled companies, including that of waste management firm Transpacific Industries in 2011 as it faced a class action for the breach of its continuous disclosure obligations – a similar situation to that currently facing Vocation.
While many investors had written Vocation off as a lost cause, the Fairfax press quoted Cummins as saying: "I wouldn't have taken the job if I didn't think we had a strong future".
Now What: Investors need to remember that Vocation still presents as a risky investment prospect. As mentioned above, Vocation was forced to sell a number of its businesses and there is no way of knowing how it will perform in its trimmed-down structure just yet.
With the company set to announce the outcomes of its strategic review in the coming weeks, investors should resist the temptation to buy and instead wait for further clarification on the direction of Vocation. In the meantime, there are plenty of other great businesses worth investing in today.
