The Hayward Effect: BP Shares Rally

Investors respond enthusiastically to Hayward's departure plans.

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While emotions are generally hard to qualify, investors’ disdain toward beleaguered BP CEO Tony Hayward may finally have gotten a price tag. Amid reports that Hayward will step down, BP’s stock has surged, with investors tacking roughly $5.6 billion back onto the company’s market capitalization

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With Monday’s bounce, BP stock revived the upward trend that began late last month as share prices hit rock bottom and started to rebound. Meanwhile, the credit-default swaps market also reflected a cheerier mood on Monday, with the price on one-year “insurance” contracts dropping to its lowest level since last month. That’s a sign that investors have more confidence in the company’s immediate stability.

Still, after the initial enthusiasm fades, it’s unclear how much momentum the stock can get out of Hayward’s departure. Jeff Saut, the chief investment strategist at Raymond James & Associates, says that investors had priced in Hayward’s exit weeks before Monday’s flurry of reports. Even Monday’s rally, for that matter, wasn’t entirely inspired by Hayward. “The fact that the alleged hurricane never turned into a hurricane, the fact that the cap has held, the fact that it looks like the relief well is [seeing progress]—I think that’s what the bounce is about, not so much that fact that Hayward is gone,” says Saut. “At the margin, it would be viewed psychologically as a positive, but I think it’s more cosmetic than anything else.”

BP’s market capitalization, which on the dawn of the crisis stood at $189.3 billion, is now roughly $121 billion. Critics suggest that Hayward’s behavior in the months following the spill has done little to help nurse the company back to life. Hayward’s high-profile gaffes include his now-famous “I’d like my life back” declaration, as well attending a yacht race at a time when BP engineers had made little ostensible progress in plugging the spill.

As BP struggles to regain its footing, a change in management could send the right message, says Morningstar analyst Catharina Milostan. “One of the central challenges that BP faces is how it goes about restoring its reputation,” she says. “Part of that could just be having a new CEO set the tone.”