Cyberonics Pays Ex-CEO $1.7M During Stock Options Scandal

Houston, TX-based Cyberonics announced it will pay former CEO Robert P. Cummins $1.7 million in cash along with other benefits within five days of his resignation, according to the Associated Press.

Cummins and another top executive quit the medical device maker Friday amidst a stock options scandal.
 
Thomas Gunderson, an analyst at Piper Jaffray, says Cummins’ departure has investors looking at the company as a potential acquisition target, given its patented and FDA-approved treatments for depression and epilepsy. Shares of Cyberonics, which specializes in devices that are used to treat epilepsy and treatment-resistant depression, surged $2.59, or 12%, to $24.17 Monday on Nasdaq.

“The removal of the CEO opens the door for possible negotiations with potential buyers,” says William J. Plovanic, analyst for First Albany Corp. St. Paul, MN-based St. Jude Medical and Medtronic of Minneapolis, MN had made overtures in the past but were rebuffed, he added.

Plovanic forecast Cyberonics could bring a $1.2 billion bid, or more than $46 per share. But an ongoing Securities and Exchange Commission probe could have a negative effect on interested buyers, analysts cautioned.

Last week, billionaire investor Carl Icahn disclosed that he had purchased 606,688 shares of Cyberonics.

Cummins resigned as chief executive, president and chairman after the company said an audit found it had used improper accounting on stock options. Federal regulators are investigating the company’s stock option expense practices, and the company is moving to restate financial results for the past five years.

Despite the audit and the investigations Cummins, who resigned Friday, will receive $1.7 million cash, 75,000 unregistered shares of company stock and accelerated vesting for outstanding options, restricted stock grants and certain benefits payments, according to the terms of Cummins’ employment agreement.