Accretive Health, Inc. (OTCMKTS:ACHI) Slammed to the Ground
Accretive Health, Inc. (OTCMKTS:ACHI)’s management team issued a press release a few minutes after Thursday’s closing bell and said numerous times that they are doing everything they can to drive shareholder value. Apparently, investors tend to disagree.
The press release said that ACHI has received a buyout offer from a company called Ascension Health. A buyout, in case you don’t know, is one of the dream scenarios for most of the OTC companies out there, but the people behind ACHI weren’t particularly impressed with Ascension’s proposition. More specifically, they weren’t happy with the price offered by Ascension which is why they turned the offer down.
Investors were not happy and during Friday’s session, they scrambled to exit their positions. ACHI wiped out half of its value, and after logging a dollar volume of more than $18 million, it stopped at $2.69 per share which, coincidentally, hovers around the price that Ascension offered for the company stock.
It’s hard to say whether investors have suddenly realized that ACHI had been overvalued for quite a while or whether they are simply angry with the management team’s decision to reject the buyout offer, but the fact of the matter is that the stock tanked heavily. This, in turn, means that there are plenty of people who will tell you that right now, the ticker presents an incredible entry point. But is this really the case?
One thing is for sure – we’re not talking about a start-up company that has nothing to show other than an interesting business plan. About a year ago, ACHI was traded on NYSE and that alone should tell you that we’re talking about a real enterprise.
It has had its rough patches. Last year, it got de-listed from the Wall Street-based exchange because of some missing SEC filings, but thankfully, the management team managed to get back on track and the company became current again.
The latest report covers the first quarter of 2015 and it should serve as yet another proof that ACHI really is a working company. That said, it also reveals some problems. Here’s a summary of the most important figures:
- cash: $132 million
- current assets: $213 million
- current liabilities: $258 million
- quarterly revenues: $10.9 million
- quarterly net loss: $30.4 million
The revenues have dropped both on a quarter over quarter and on a year over year basis, the company is far from debt-free, and consistent profitability is still a long way away. In other words, the management team still have a lot of work to do, and by the looks of things, rejecting Ascension’s offer has made their task a little bit more difficult.
Thursday’s press release said that Ascension and its affiliated hospital systems have been responsible for around 50% of the cash ACHI generated through contracting activities. All this is thanks to a master professional service agreement between ACHI and Ascension which is supposed to expire in a couple of years’ time. Ascension announced last week that they have no intention of renewing it.
So, while a bounce after Friday’s horrific crash isn’t unlikely, ACHI‘s long-term prospects are still surrounded by quite a lot of question marks. Proceeding with caution is, as always, a good call.
