Adeptus Health Inc (OTCMKTS:ADPTQ) Delivers Gains But Uncertainty Remains
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Adeptus Health Inc (OTCMKTS:ADPTQ) Delivers Gains But Uncertainty Remains

Today, we will again assess Adeptus Health Inc (OTCMKTS:ADPTQ), the health care company, as new financial statements came out and new information about the restructuring process has been released.

Our readers will remember that we noted in our previous piece “Adeptus Health Inc (OTCMKTS:ADPTQ) A Possible Turnaround Play” that Deerfield Management was trying to acquire ADPTQ and some market participants had claimed that the agreed upon price was unfair. Additionally, it has been said that the transaction was quite opportunistic, as the company filed for bankruptcy on April 19, 2017.

Six months stock chart for Adeptus Health Inc. (OTC: ADPTQ)

6 months chart for ADPTQ

We need to note that we discovered this company when the share price was $0.592. As of today, September 18, 2017, the stock price is $1.41. For those who need a calculator, the share returns equal 138%.

In this new piece, we will try to assess the new financial statements released to answer whether the share price seems still undervalued.

Recent Developments

Several equity owners have claimed that Deerfield Management, which is holder of company’s debt, was trying to acquire it at an unfair price. The initial bankruptcy agreement was going to leave the equity holders with almost nothing.

In this document, we could find most of its demands, which included the appointment of a trustee, the appointment of an examiner, and the termination of the debtor’s’ exclusivity period. It is very well explained in this article published on Seeking Alpha.

What’s new?

The company did not release any new communication after April 19, 2017. Most information had to be obtained from the SEC filings. After our last piece, the following filings were received.

On May 10, Daniel W. Rosenberg, director of the company, resigned. On May 25, 2017, Steven V. Napolitano also resigned. This last director noted that the decision “was not the result of a disagreement with the Company on any matter relating to its operations, policies or practices.”

What’s happening?

In our opinion, those directors resigned, as they knew that they were going to be changed, as the company will soon have another owner.

Finally, on September 13, 2017, the market received another filing, wherein we could find a Third Amended Joint Plan of Reorganization. It seems that some legal aspects have been changed. This is good, but the court still needs to approve it. In our opinion, the market appreciated the filing, as the share price increased on September 14 and September 15, 2017. Additionally, we could read that the confirmation hearing for the plan will commence on September 26, 2017 at 9:30 a.m. (Central Time). Hence, we will be alert on that date.

New Financials

We did not find the new financial information in the mainstream financial websites, such as Yahoo Finance. Thus, we believe that it was good to note it in this piece. The following are the most significant new financial accounts:

  • Cash: $24,524,218
  • Accounts receivable, net of allowance: $32,118,436
  • Deferred tax asset: $202,384,237
  • Total Assets: $420,917,534
  • Long-term debt, less current maturities: $192,833,855
  • Total liabilities: $616,704,395

Is this information relevant?

Yes, as it is the first financial document released after the company declared bankruptcy. It helps understand the financial state of the company. The previous reports showed that the balance sheet was quite solid, so the shares seemed quite undervalued. In this new report, we can see that the net assets are negative and the restructuring process will need to be long. As mentioned in the Seeking Alpha article, it is very complicated to determine what’s about to happen after bankruptcy. We have seen other processes similar to this one, wherein shareholders got wiped out.

Insiders

Individual or EntityMost Recent TransactionDateShares Owned as of Transaction Date

BOWEN TRACI

Acquisition (Non Open Market)

Feb 24, 2016

10,590

CHERRINGTON GRAHAM

Acquisition (Non Open Market)

Feb 24, 2016

45,271

COVERT RICHARD

Acquisition (Non Open Market)

Jan 2, 2017

12,722

FIELDING TIM

Acquisition (Non Open Market)

Feb 24, 2016

12,018

Source

It is interesting to check the activity of directors or equity funds. We were glad to find that no insider sold shares of the company.

Conclusion

Currently trading with a market cap of $23 million, ADPTQ has been a solid pick for our subscribers. We identified the stock, because some market participants had decided to go against the debt holders in the bankruptcy court. The group of activists was asking for more money and it seems that their strategy worked out.

What happens now?

In our opinion, we need to see whether the court accepts the plan and the company exits its current situation in a beneficial manner for equity holders. In this article, we had a look at the new balance sheet and concluded that the restructuring will need to be long. Like other authors, we conclude that the situation is uncertain. Maybe it is time, for those who got the chance to read our first article, to take profits. For all the others, we will keep informing, so be alert!

Be sure to check out our coverage on ADPTQ!

We will be updating our subscribers as soon as we know more. For the latest updates on ADPTQ, sign up below!

Image courtesy of Ryan Lavering via Flickr

Disclosure: We have no position in ADPTQ and have not been compensated for this article.

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Adeptus Health Inc (OTCMKTS:ADPTQ) Delivers Gains But Uncertainty Remains
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