It has been a wild few days of trading for leading value-based primary care provider and population health company, Cano Health (US:CANO). After the shares lost more than 20% of their market cap on Friday, they came roaring back and more, closing Monday at 47.3% higher. What happened?
Most likely is was the push for a change of CEO by three board members who resigned on Thursday.
Their decision comes as CANO’s share price trades at more than 90% below its initial trading range of around $15 per share when the company completed its SPAC merger with Jaws Acquisition in mid-2021.
Directors Revolt
Elliot Cooperstone and Lewis Gold, along with former board director Barry Sternlicht, entered into a pact on Monday, agreeing to act together to pursue change at the company; including the replacement of CEO Marlow Hernandez, the sale of non-core assets, and other moves to enhance shareholder value.
In a Schedule 13D filing, the former directors cited their desire for change at the company as the reason for their resignation. The group has a combined voting power of approximately 35.7%, based on an aggregate of 528,178,564 shares of Class A and Class B Common Stock outstanding as of March 31, 2023.
Following their resignation, Cano Health issued a statement expressing disappointment with the trio’s focus on the short term, disagreeing with their assessment of Dr. Hernandez’s performance. The statement also criticized Sternlicht’s method of resignation, saying that it was “reckless” and “obviously at cross-purposes with shareholders’ best interests.”
Market Positive
Despite the company’s response, the market responded positively to the news of the board members’ resignation and plans for change.
This change could be a good outcome for investors, as it shows that the board is willing to take action to enhance shareholder value. The group’s plans to replace the CEO and sell non-core assets could result in a more focused and efficient company, which could lead to increased profitability and long-term growth for investors.
It remains to be seen how the situation will play out, but it is clear that Cano Health is facing a significant shake up of key leadership positions and the board is willing to take action to address Cano’s problems.
The bold moves by the board members could be seen as drastic but realistically required given the extreme shareholder value that has been destroyed by CANO’s share price that is well below its listing price in 2020.
Solid Q4
At the beginning of March, Cano reported solid fourth-quarter results with total revenue of $680.4 million, increasing 38% over the year and beat analyst forecasts of around $650 million. Cano’s total membership also saw an impressive growth of 36% YoY to 309,590, with Medicare capitated members growing by 42%.
Despite recording a net loss of $301.7 million, Cano Health CEO Hernandez added positive commentary on the outlook for the company. He provided full-year 2023 guidance with a membership target of 375,000 to 385,000, total revenue in the range of $3.10 billion to $3.25 billion, and an adjusted EBITDA of approximately $75 million to $85 million.
Fintel’s consensus target price of $3.69 suggests analysts think CANO could rise over 300% this year.
The chart above from Fintel’s CANO forward forecast page shows analyst forward revenue expectations for the company. The market is forecasting for continued sale growth through to 2030.
Still, the stock garners a bearish Fund Sentiment Score of 23.94 which ranks CANO in the bottom 10% out of 37,625 globally screened securities tracked by Fintel for the highest levels of institutional buying activity.
Cano Health has 330 institutional owners and shareholders that hold a total of 126,144,585 shares. The largest shareholders include JP Morgan Chase, Vanguard, Point72 Asset Management, Owl Creek, BlackRock and Fidelity.
This story originally appeared on Fintel.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
