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Bounty on Braly? $1.4 billion

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Investors who called strongly for the head of WellPoint Inc. CEO Angela Braly got what they wanted last week. And what did they pay in return? $1.4 billion.

That’s how much investors bid up WellPoint's total shares outstanding the day after Braly resigned from her positions as chairman and CEO of the Indianapolis-based health insurer. WellPoint's shares rose 7.7 percent on Aug. 29, increasing its total market value $1.4 billion. Several analysts also upgraded their ratings of the company.

Panos Mourdoukoutas, an economics professor at Long Island University, cited Braly as an example of a CEO who is at best “worthless” for shareholders—and at worst destroys value.

“Executives who are founders of successful companies, like Steve Jobs and Bill Gates—and the executive engineers and marketers, who shared their vision—are worth hundreds of billions of dollars, as evidenced by the market capitalization of Apple and Microsoft,” Mourdoukoutas wrote in his blog at Forbes.com. “Executives who are career bureaucrats working for companies others created and add very little value to the organization are worthless. Worst, they may destroy rather than create value for corporate owners.”

Still, does the CEO really make that much of a difference? While WellPoint is being run on an interim basis by General Counsel John Cannon, it still will have the same strengths and weaknesses: It will be a successful company in the commercial health insurance markets trying to make the turn to government-sponsored markets, where growth is most likely to occur.

At least some analysts seem to think Braly’s exit will be meaningful. Sanford C. Bernstein analyst Ana Gupte raised her rating from “market perform” to "outperform,” and boosted her predicted price for the stock $1, to $73 per share. She said earnings misses and pricing mistakes under Braly had kept some investors on the sidelines—until now.

“We see operational turnaround as much more likely with a new CEO under the auspices of a board that has been made accountable, particularly with regard to the systemic issues on pricing and underwriting that the company has experienced across all segments of commercial, Medicare and Medicaid,” Gupte wrote in an Aug. 29 report to investors.

JPMorgan Chase analyst Justin Lake boosted his price outlook from $60 per share to $65. Lake attributed the price bump to “the board’s clear willingness to act in the best interest of shareholders.”

WellPoint’s stock price has lost about half the gains it enjoyed after Braly’s departure, and the company’s market value is now about $700 million higher than it was before her resignation.

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  1. to mention the rest of Molly's experience- she served as Communications Director for the Indianapolis Department of Public Works and also did communications for the state. She's incredibly qualified for this role and has a real love for Indianapolis and Indiana. Best of luck to her!

  2. Shall we not demand the same scrutiny for law schools, med schools, heaven forbid, business schools, etc.? How many law school grads are servers? How many business start ups fail and how many business grads get low paying jobs because there are so few high paying positions available? Why does our legislature continue to demean public schools and give taxpayer dollars to charters and private schools, ($171 million last year), rather than investing in our community schools? We are on a course of disaster regarding our public school attitudes unless we change our thinking in a short time.

  3. I agree with the other reader's comment about the chunky tomato soup. I found myself wanting a breadstick to dip into it. It tasted more like a marinara sauce; I couldn't eat it as a soup. In general, I liked the place... but doubt that I'll frequent it once the novelty wears off.

  4. The Indiana toll road used to have some of the cleanest bathrooms you could find on the road. After the lease they went downhill quickly. While not the grossest you'll see, they hover a bit below average. Am not sure if this is indicative of the entire deal or merely a portion of it. But the goals of anyone taking over the lease will always be at odds. The fewer repairs they make, the more money they earn since they have a virtual monopoly on travel from Cleveland to Chicago. So they only comply to satisfy the rules. It's hard to hand public works over to private enterprise. The incentives are misaligned. In true competition, you'd have multiple roads, each build by different companies motivated to make theirs more attractive. Working to attract customers is very different than working to maximize profit on people who have no choice but to choose your road. Of course, we all know two roads would be even more ridiculous.

  5. The State is in a perfect position. The consortium overpaid for leasing the toll road. Good for the State. The money they paid is being used across the State to upgrade roads and bridges and employ people at at time most of the country is scrambling to fund basic repairs. Good for the State. Indiana taxpayers are no longer subsidizing the toll roads to the tune of millions a year as we had for the last 20 years because the legislature did not have the guts to raise tolls. Good for the State. If the consortium fails, they either find another operator, acceptable to the State, to buy them out or the road gets turned back over to the State and we keep the Billions. Good for the State. Pat Bauer is no longer the Majority or Minority Leader of the House. Good for the State. Anyway you look at this, the State received billions of dollars for an assett the taxpayers were subsidizing, the State does not have to pay to maintain the road for 70 years. I am having trouble seeing the downside.

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