Toronto-based Optimist Fund told investors in its Q4 letter that it sold its shares of Xponential Fitness (NYSE:XPOF) after the company’s Founder and CEO Anthony Geisler announced his resignation last May. Optimist’s Founder and Chief Investment Officer Jordan McNamee “believed [Geisler’s] leadership would drive long-term value creation by successfully scaling boutique fitness brands.” He called Geisler’s leadership “the cornerstone” of the fund’s decision to invest in Xponential, and his resignation was likewise its reason for exiting.
The fund’s decisive action highlights a growing phenomenon in investment strategy: institutional investors are increasingly factoring leadership into their portfolio decisions, sometimes making dramatic moves when key executives depart. This trend spans industries and reflects heightened awareness of how leadership transitions can fundamentally alter a company’s trajectory and valuation.
Geisler’s Departure and Market Response
Baird analysts responded to Geisler’s exit and the company’s transitioning leadership by cutting their price target on XPOF from $14 to $10 while maintaining a Neutral rating.
By May 2024, XPOF had already fallen roughly 74% from its peak a year earlier, reflecting diminished investor confidence. The Optimist Fund’s exit exemplifies how even a single institutional investor’s decision can signal broader market concerns. Their explicit citation of the founder and CEO’s departure as the trigger for divestment underscores the premium certain investors place on founder-led companies and their reluctance to maintain positions when that advantage disappears.
The Science of C-Suite Departures
Research on leadership transitions reveals distinct patterns in how markets process executive departures. A comprehensive analysis of CEO transitions indicates they often trigger immediate stock price volatility. The nature and magnitude of this volatility typically depend on several factors: whether the departure was expected, the circumstances surrounding it, and the perceived strength of succession planning.
In forced resignations due to misconduct or poor performance, markets often react with short-term pessimism that can reverse once a credible successor is named. This pattern was evident in Kroger’s case, where CEO and Chairman Rodney McMullen resigned in March 2025 following a board investigation into personal conduct violations. The company’s stock declined a moderate 1.5%, reflecting a balanced assessment of the circumstances.
More dramatic market responses tend to follow unexpected departures of well-regarded leaders with no clear succession plan. When Stellantis CEO Carlos Tavares resigned unexpectedly in December 2024, the company’s stock dropped 8.5%, hitting a two-year low. This significant decline highlighted investor concerns about leadership continuity and strategic direction.
Similarly, Dave & Buster’s Entertainment experienced a 16% stock drop in January 2025 when CEO Chris Morris resigned amid larger-than-expected quarterly losses. Without a permanent replacement immediately identified, investors reacted strongly to the dual challenges of leadership vacuum and disappointing financial performance.
Institutional Investment Strategy Shifts
The Optimist Fund’s exit from Xponential exemplifies a broader trend in institutional investment strategy. Major funds increasingly incorporate leadership assessment into their investment frameworks, sometimes developing sophisticated models for evaluating executive transitions.
Recent market movements suggest this trend is accelerating. Tiger Global Management significantly reduced its position in Peloton Interactive following that company’s executive restructuring, decreasing its holding by approximately 60%. The firm cited “evolving market dynamics and strategic uncertainties” as factors in its decision, highlighting concerns about the company’s transition away from its founder-led model.
Conversely, some institutional investors view leadership changes as potential catalysts for improvement. ValueAct Capital increased its position in Spotify following the streaming giant’s leadership reorganization, seeing opportunity in the company’s streamlined decision-making structure and enhanced operational focus.
Similarly, Bill Ackman’s Pershing Square Capital Management increased its stake in Howard Hughes Corporation during that company’s CEO search, explicitly stating they viewed the leadership transition as “an opportunity rather than a risk.” This $275 million additional investment brought their total stake to approximately 18% of outstanding shares.
These contrasting approaches highlight the nuanced ways institutional investors assess leadership changes. While some, like Optimist Fund, exit positions when key leaders depart, others see transition periods as opportunities to establish or expand positions at potentially attractive valuations, betting on long-term improvement under new management.
The Analyst Perspective
Financial analysts play a critical role in interpreting leadership changes, often influencing broader market sentiment through their recommendations. Their assessments typically focus on how leadership transitions might affect operational execution, strategic direction, and ultimately, financial performance.
When Walgreens CEO Rosalind Brewer resigned in August 2023 after a challenging tenure, Evercore analyst Elizabeth Anderson noted that while the “timing took many by surprise, the event itself was not” given the company’s ongoing struggles. She observed that as Walgreens pivoted toward healthcare services, it “makes sense to search for new leadership” with relevant experience.
This pragmatic assessment reflects how analysts often contextualize leadership changes within broader business challenges. The moderate 2.2% stock decline following Brewer’s resignation suggested investors largely agreed with this balanced perspective.
In Lyft’s case, when co-founders Logan Green and John Zimmer stepped aside for veteran David Risher in 2023, analysts noted the company “needed to do something to begin rebuilding investor trust.” The modest 3% after-hours stock rise indicated cautious optimism about the leadership change, though not overwhelming enthusiasm.
These measured analyst responses contrast sharply with more dramatic reactions to founder departures in technology and growth companies. The stark difference between market responses to leadership changes at established companies like Walgreens versus founder-led organizations like Lucid or Xponential highlights how company maturity and leadership structure influence investment risk assessment.
