News of the sudden passing of Mr Sim Wong Hoo, founder, Chairman and CEO of Creative Technology (SGX: C76), earlier this week came as a shock to Singapore. Mr Sim was 67.
Unlike many Singaporeans whose first interaction with Creative Technology would likely be one of their popular products such as their sound blasters or MP3 players, I first know of Creative Technology as a stock.
On the Teletext where I used to look at share prices in the 90s, Creative Technology stood out because of its high share price. At its peak in 2000, the company share price was more than $58 per share, the highest on the SGX.
One constant that has been in the company since day one was Mr Sim. Since founding the company in 1981, he has been its Chairman of the Board and CEO.
While many great companies do outlive their founders, what is less common is the sudden passing of a founder who is the CEO of a publicly traded company, and still actively involved in the business on a day-to-day basis. According to news reports, Mr Sim passing was a “sad and sudden development” and he was working the night before he passed on.
The Market Doesn’t Always React The Way We Think It Should
Like it or not, the stock market is a measurement of investors ‘sentiment. Even as tributes for Mr Sim continue to dominate headlines in Singapore, an interesting observation can be made on how its share price has performed this week.
On 5 January, the day that Creative Technology announced the passing of Mr Sim, the company share price went up about 25% from $1.41 (closing on 4 January) to close at $1.77. Creative Technology’s share price closed at $1.79 for the week.
When I first heard that Mr Sim had passed on, I thought this would be bad news for the company. After all, Mr Sim is the founder and still actively working in the company as its CEO so his sudden death would surely create challenges for the company. By the end of the day, however, it was clear that the market is still bullish about the company’s future.
The demise of a charismatic founder does not signal the end of a company. The best example I can think of is Creative Technology’s main competitors in the early 2000s – Steven Paul Jobs and Apple.
Prior to his death, Steven Jobs was synonymous with Apple and the company grew to become one of the world’s biggest and most valuable companies during his time as CEO from July 1997 to August 2011. During this period, Apple’s share price went from about USD 0.14 to USD 12.26.
After his passing in October 2011, Apple continued to perform well as a company under Tim Cook’s leadership and its shares are now trading at about USD 129 as of the end of 2022. It’s still one of the biggest and most valuable companies in the world.
While tragic, the passing of a founder and CEO does not necessarily make investors bearish about the future growth of the company. Companies can, and do, continue to thrive even after their founders are no longer around.
The Market Can Disconnect Itself From The Emotions Of The World
The morally correct reaction from the stock market that would make us comfortable would be for Creative Technology’s share price to decline this week, as the company takes the time it needs to process what the sudden death of its founder and CEO meant for the future of the company.
Tragic as it may be, the fact that share price spike shows how the market can behave differently from what we think it should and it’s not easy to explain the reason why. However, one thing we know is that investors will put their money into what they believe in. This seems to suggest that the market is confident that Creative Technology, the company that Mr Sim has spent his life building, would continue to do well in the future.
Top Image Source: Creative Technology
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