The most valuable commodity I know of is information.
—Michael Douglas as Gordon Gekko, Wall Street
On August 7, 2015, the mood at Chipotle headquarters in Denver, Colorado, was jovial. The stock (NYSE: CMG) of the chain of “fast casual” Mexican restaurants had just reached an all-time high of $749.12. Sure, the company faced its fair share of challenges (including an alarmingly high number of lawsuits), but today was a day to celebrate.
Fast-forward six months. As so often is the case these days, things had changed very quickly.
A series of food-borne illnesses came to light at the end of 2015—and not just a few mild stomachaches caused by a batch of bad salsa. The true culprit: E. coli. As the Centers for Disease Control and Prevention (CDC) announced on December 2, 2015, “52 people from nine states have been sickened, 20 have been hospitalized, and there are no deaths.”1
By April 16, 2016, Chipotle’s stock was in free fall, dropping 40 percent from its high to $444. Things continued to spiral downward for the chain. The stock hit $370 on December 9 of that year. In August 2016, nearly 10,000 employees sued the company for unpaid wages. In September, a 16-year-old girl won a $7.65 million lawsuit against the company for sexual harassment. One of the victim’s attorneys described the situation as “a brothel that just served food.”2 Damning words to be sure.
Sensing opportunity, activist investor Bill Ackman started gobbling up Chipotle equities. ...