What does the departure of SciQuest CFO really mean? by Jon Hansen

Baseball is a great game. In fact it is America’s pastime.

As a result, I would like to view the recent news out of SciQuest regarding the departure of their CFO within the context of a batter coming up to the plate.

For those unfamiliar with the game, the batter gets an opportunity to hit the ball until they have three strikes or swings of the bat. If they fail to make contact and get on base safely, they are out.

Strike 1

“It’s an especially bad sign when a company’s Chief Financial Officer (CFO) leaves suddenly. No one knows more about a company’s financial condition than the CFO.” – Look for “Red Flags” on Stocks by Jerry Helzner

Similar to when a CEO starts selling their shares, it is rarely a good sign when a CFO leaves a company.

In what was described as being an “abrupt departure,” SciQuest announced that CFO Rudy C. Howard was leaving the position he has held since January 4th, 2010. There was no reason given for the move, nor were there any elaborations as to why this was happening now.

Strike 2

“It’s true that insiders sell stock for a variety of reasons, such as buying a house or paying college tuition for their kids, but multiple insider sales of a single company’s stock is one of the clearest warnings that things aren’t going right. If the insiders are selling a stock, you should be getting out too.” – Look for “Red Flags” on Stocks by Jerry Helzner

Howard’s successor Jennifer Kaelin, who was most recently head of the finance team at SciQuest, has stepped into the CFO role. In what appears to be one of her first moves as the top finance person at the company, Kaelin sold 2,400 shares for a total value of $36,265.15.

As reported in my September 18th, 2014 post How alarming is it when CEOs start selling their shares? SciQuest CEO Stephen J. Wiehe has been unloading shares through what appears to be a 10b5-1 plan. Current shareholders along with existing and prospective clients should take note.

Strike 3

“All big companies get sued from time to time — it’s part of the price of being big and having deep pockets. But when you see a number of similar lawsuits being filed against a company, it’s a good time to exit that stock.” – Look for “Red Flags” on Stocks by Jerry Helzner

Just before the NIGP #CodeGate story broke, I began looking into the news that SciQuest was being sued by client John Muir Health, a California non-profit public benefit corporation, for breach of contract.

When you take into account the legal saber rattling in 2013 by Wiehe, when both Colorado and Oregon made the decision to drop SciQuest after encountering implementation difficulties that could not be addressed, it is clear that there might be a number of serious problems with the company’s offering.

While you will not likely read about the above developments in an industry features, function, benefits analysis of the SciQuest solution, it is nonetheless important. This is because it is the people behind the technology, who ultimately determine a vendor’s ability to meet end-user requirements. It is also the leadership who determines when and even if, shareholders will ever realize the hoped for value on their investment.

Given what you now know, would you invest in SciQuest? And I am not just talking about becoming a shareholder. I am also asking this question from the standpoint of being either a client or for that matter employee.

30