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26 Mar 2024
Scott Graeff leaves company after 21 years; stock price down nearly 50% since news that 2023 sales figures were under review.
Luna Innovations, the US-based provider of fiber-optic test and sensing technology, is searching for a new CEO after announcing the retirement of Scott Graeff, who had held the post for the past seven years.
Graeff’s retirement, which also sees the executive exit the firm’s board of directors, comes two weeks after Luna said it was conducting a review of “certain transactions” that were recorded last year - an announcement that prompted a 40 per cent dive in its stock price.
Graeff, who was also president of the Roanoke, Virginia company, had worked at Luna for 21 years overall.
Operations committee
While Luna has initiated a search for a new CEO, its current chairman Richard Roedel is stepping in as interim executive chairman and interim president.
A new “operations committee”, comprising board members David Chanley, Barry Phelps, and Gary Spiegel, has also been appointed.
“Luna Innovations has a rich history of working in close collaboration with its customers and partners to develop best-in-class sensing, test and measurement, monitoring, and control solutions,” said Roedel in a statement revealing the management changes.
“Our company’s success is rooted in ensuring we operate in a manner that reflects the highest standards of integrity and with the openness and transparency that reflects the trust our customers put in us.
“We remain fully committed to our vision, mission, and values while advancing our leadership in fiber optic-based technology to enhance safety, security and connectivity in the world.”
Meanwhile in a post on LinkedIn, Graeff wrote: “For the past 21 years I have proudly served in a variety of executive roles at Luna Innovations, the past 7 as CEO.
“In those roles, I was fortunate to lead incredible teams whose spirit and determination was second to none. We used our collective drive to bring some incredible and critical technology to a broader market that made the world a little bit safer.
“But, as is a constant truth in life, all good things must come to an end and today, I am stepping down as CEO.”
Special committee investigates
Luna has also appointed a special committee of its board of directors to review certain sales revenues that had been recognized in the second and third quarters of 2023, with the assistance of external legal and financial advisors.
It said that the transactions identified did not in fact qualify for revenue recognition under US generally accepted accounting principles (GAAP).
The committee is said to be examining the circumstances surrounding these issues and is evaluating, among other things, Luna’s disclosure controls and internal control over financial reporting, to see whether changes in accounting policies or other policies are needed.
“The company currently anticipates reporting material weaknesses in internal controls related to evaluating customer arrangements for proper revenue recognition and other controls, and will be working to remediate these issues,” the company announced March 12, along with a delay to the release of its full-year earnings report.
Immediately following that announcement Luna’s Nasdaq-listed stock price dropped in value by around 40 per cent, with further losses after the announcement of Graeff’s retirement.
In early trading March 26, Luna’s stock price stood at around $3.45, down from $6.29 prior to the news of the delayed results and investigation, and equivalent to a market capitalization of approximately $120 million.
Back in November Graeff and his colleagues had reported sales of $84.9 million for the first nine months of 2023, with the full-year total expected to be somewhere between $120 million and $125 million.
Since then, the firm has expanded its operations with the acquisition of UK-based fiber-optic sensing firm Silixa at a cost of up to $38 million, funded in part through a $50 million investment from New York’s White Hat Capital Partners.
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