Why Discover Financial Services Stock Got Thrashed on Tuesday

What happened

Change can be hard for investors, and it can be particularly difficult when it occurs at the very top of the management structure of one of their investments. That was the dynamic behind the more than 9% fall in Discover Financial Services' (NYSE:DFS) share price on Tuesday, as its CEO stepped down from his position.

So what

After market hours on Monday, Discover announced that CEO and board of directors member Roger Hochschild is vacating those posts. It did not provide any reasons for his departure. He will stay on at the financial services company as an advisor until the end of the year.

He has been replaced on an interim basis by John Owen, a fellow board member. He's a recent arrival at Discover, joining its board in June 2022. The company said he has 38 years of experience in both the tech and banking sectors. Most recently, he served as COO of lender Regions Financial.

Investors were likely shocked by Hochschild's move, as it was effective immediately.

Discover added that it has hired an executive search firm it did not name to begin the process of finding a permanent replacement for its departed leader.

Now what

Top-level executive departures are inevitable in the corporate world, of course. However, it seems that this one caught investors by surprise and perhaps made them worry about the state of Discover these days.

While the company isn't doing badly in many respects these days, it did disclose a regulatory issue in its latest quarterly earnings report. This centered on the merchant fees it charged its clients. It's unclear, though, whether this has anything to do with Hochschild's departure.

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Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services and Regions Financial. The Motley Fool has a disclosure policy.