Editor's note: Leadership can make or break a company...

According to Marc Chaikin – founder of our corporate affiliate Chaikin Analytics – management teams diverging from what's best for shareholders can cripple even the best-performing companies.

That's why it's crucial to look for companies whose management takes care of its shareholders and treats them like the business owners they are.

In today's Masters Series, adapted from the May 27 issue of the Chaikin PowerFeed daily e-letter, Marc analyzes a company that fell from grace due to poor leadership...

Good Leadership Sent This Stock Soaring... But It Wouldn't Last

By Marc Chaikin, founder, Chaikin Analytics

By the end of 2021, John Riccitiello was on top of the world...

But it wouldn't last long.

He was the CEO of Unity Software (U). Thanks to its popular game-development engine, Unity was one of the most popular names in the video-game space.

A year earlier, Riccitiello had taken Unity public. The company's stock nearly tripled in just 14 months.

Unity's revenue was growing by more than 40% a year. And it had just announced plans to acquire Weta Digital – the visual effects company behind The Lord of the Rings and Game of Thrones.

Unity's business was booming.

And it was paying off big for Riccitiello...

He owned 3.5 million shares of Unity's stock worth roughly $700 million. Alongside his previous wealth, he was the video-game industry's newest billionaire.

Riccitiello had also recently paid more than $32 million for a mansion in Montecito, California. It sprawled across 18,000 square feet and had 12 bathrooms.

The success was a redemption story for Riccitiello. But it ultimately faded...

Eight years earlier, Riccitiello had been pushed out as CEO of video-game giant Electronic Arts (EA).

Back then, EA struggled with the transition to digital distribution. Its revenue had flatlined during Riccitiello's six-year tenure. And some of the company's newest games suffered from technical glitches.

Riccitiello took the blame for EA's poor performance.

A lot of folks in the video-game space were glad to see him go...

As you can imagine, the industry is full of smart programmers. To them, Riccitiello was a glorified salesman.

Riccitiello didn't have any tech skills. He was a "corporate type" who spent his early years at consumer-products giant Clorox (CLX), snack-and-beverage titan PepsiCo (PEP), and ice-cream maker Häagen-Dazs. In the 1990s, he worked at sports-equipment manufacturer Wilson Sporting Goods and dessert company Sara Lee.

Riccitiello didn't grow EA's business. But he was good at squeezing profits out of its games...

You see, Riccitiello saw the power of "microtransactions." These are small fees for things that can enhance play in a video game, such as more powerful weapons or different clothes.

Most gamers hate microtransactions. But plenty of them still pay up for a better gaming experience. And these fees generated massive profits for EA.

Of course, that ultimately didn't save his job. But Unity's success helped Riccitiello forget about his failure at EA.

Even better, his new company had massive room for growth...

Unity had the industry's most popular gaming "engine." That's the software used to create and run video games. Thousands of companies gladly paid to use this technology. It simplified the process of making a game that works on consoles, mobile devices, and PCs.

Under Riccitiello's leadership, Unity grew beyond its core engine business. This second unit focused on adding advertising and other "monetization" features to games.

Unity's ad business was a huge growth driver for the company...

Sales grew by more than 50% in 2020 and 2021. Its auction-based service allowed game makers to get the highest price for ad placement. Even better, this service gave Unity the potential to eventually expand beyond the video-game market.

Put it all together, and it makes sense that the stock posted such a great run after the company went public. Take a look at the move higher up to the November 2021 peak...

Unity was one of the most promising stocks on the market.

But a series of bad decisions would see that unravel. In short, Riccitiello's leadership took a turn for the worse.

And now, the stock is down a staggering 88% from its 2021 high.

Companies that perform well do so because of good decision-making. Tomorrow, I'll explain what went wrong at Unity when leadership stumbled.

Good investing,

Marc Chaikin

Editor's note: Unity's rise and fall shouldn't scare you out of the technology sector. You just need to find the right stocks and management teams. That's why Marc just unveiled a breakthrough feature in his Power Gauge system that can help you uncover innovative tech stocks months before other investors – ones that could help double or triple your money...

He's holding a special briefing on Wednesday, June 25 to reveal how this unique tool can help you identify lucrative new investments... and he's helping you prepare for the year's biggest turning point in the market. Click here to get the full details...