October 29, 2008 / 12:01 PM / 11 years ago

UPDATE 2-MF Global replaces CEO Kevin Davis; shares surge

(Recasts, adds details, analysts comments, stock movement)

By Sweta Singh

BANGALORE, Oct 29 (Reuters) - MF Global Ltd MF.N surged as much as 53 percent on Wednesday, after the company replaced Chief Executive Kevin Davis with industry veteran Bernard Dan in what has been a tumultuous year for the futures broker.

Bernard Dan, who is currently the president and chief operating officer, had joined the company in June after heading Chicago Board of Trade, which was acquired by the CME Group (CME.O) last year.

“We see Bernie Dan’s appointment as the much needed confidence booster for the stock,” Kenneth Worthington of J.P. Morgan Securities wrote in a note to clients.

Kevin Davis resigned after what has been a particularly challenging period for MF with disappointing management and operational mistakes, Worthington said.

MF Global shares have lost more than 90 percent of their value since January, being hit by a rogue-trading scandal and liquidity concerns.

Davis, who has been with the company for 17 years, will receive a severance payment of $7.5 million, the company said in a regulatory filing.

“We view the resignation of Kevin Davis and the promotion of Bernie Dan to CEO as a positive for MF Global, as Mr. Davis had lost investor confidence in our opinion,” Christopher Allen of Banc of America Securities wrote in a note.

The company also forecast second quarter earnings below analysts’ estimates, taking a hit from fall in trading volumes in August and severance costs.[ID:nBw295375a]

MF’s second quarter profit, with only modest bad debt expenses, is extremely positive for the company as investors have been acting as if the company was going out of business, Allen said.

Second quarter earnings took a hit of 5 cents a share from severance costs and 2 cents a share from bad expense related to Lehman bankruptcy, the company said.[ID:nWNAB3696]

Shares of MF Global were trading up 37.3 percent at $3.08 in morning trade on the New York Stock Exchange. (Editing by Amitha Rajan, Dinesh Nair)

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