Thursday, July 7, 2022

Adeptus Health Inc (OTCMKTS:ADPTQ) Reaching Peak Volatility

Adeptus Health Inc (OTCMKTS:ADPTQ) continues to be an interesting stock to value because of recent activist shareholders entering the fold. In April, ADPTQ filed Chapter 11 and shareholders and debtors have been sparring over the actual value of the company. In May, shareholders appeared depleted and activist funds arrived. These activist shareholders are questioning Deerfield’s intentions, but the overall story is still developing and volatile.

If ADPTQ were to liquidate its assets and restructure, there could be value here. Adeptus Health provides emergency medical care through a network of approximately 80 independent, freestanding emergency rooms in the U.S. Moreover, the company owns two licensed general hospitals. These assets are based primarily in three areas: Texas (Dallas/Fort Worth, Houston, Austin, San Antonio), Colorado (Denver and Colorado Springs) and Arizona (Phoenix). And each of these facilities is about 6,000-7,000 square feet. Essentially, they are typical hospital emergency rooms, but without the hospital. They have about 6-9 exam rooms each, as well as medical test equipment. All of these assets are worth something, and while a turnaround is unlikely, value could still be there at the right price.

Adeptus Health Inc (OTCMKTS:ADPTQ) is currently trading up and hedge funds across the country are snatching up shares based on filings with the SEC. Scout Investments bought $1.73 in the fallen healthcare company. Bank of America Corp DE raised its position in ADPTQ by 23.3% in the first quarter. However, the company’s current price has many fearing a pullback.

Last month, a group of shareholders claimed that Deerfield may be planning to acquire the company on the cheap, and may be intentionally understating the value of ADPTQ assets. The obvious concern was that shareholders and unsecured debt holders would get almost nothing in any restructuring, while Deerfield Health would walk away owning a company that’s worth significantly more than the $19 million in current market capitalization.

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Creditor Wexford Spectrum Investors and Debello Investors (collectively, “Wexford”) filed with the U.S. Bankruptcy Court an expedited motion to appoint an official committee of equity security holders for the Adeptus Health case.

The motion explains, “It appears from all of the Debtors’ public statements that many of the Debtors are suffering from a temporary liquidity or cash flow crisis. However, Inc. – when viewed on a standalone basis – does not even appear to suffer from such a temporary crisis. Rather, by all indications, Inc. is a solvent company with significant equity value for its shareholders and, in fact, Inc. represented to the public and its shareholders that it had hundreds of millions of dollars of equity value even six months ago.”

ADPTQ has not put out much press since the filing. Below are the last significant quotes released by the company and Deerfield in April.

“Our partnership with Deerfield and the actions we are taking today are intended to strengthen Adeptus and enable us to continue our mission of providing access to the highest-quality medical care to the communities we serve,” said Gregory W. Scott, Chairman and Interim Chief Executive Officer of Adeptus. “Over the last several years, Adeptus has invested significantly to expand our facility footprint and respond to the growing demand for high-quality emergency medical care. While these investments have increased patient access, the associated expenditures have strained the Company’s financial resources. We believe that our partnership with Deerfield and the associated court-supervised restructuring process is the best path forward for Adeptus. As a long-term investor in the Company, Deerfield understands our business well. Their desire to deepen their relationship and commitment to our business, employees and partners demonstrates that they share our confidence in Adeptus and in our future prospects.”

Jim Flynn, Managing Partner of Deerfield Management, said, “We are pleased to enter into this partnership with Adeptus. Adeptus Health’s network of freestanding emergency rooms, employees and partners provides an excellent foundation for efficiently delivered, high-quality emergency medical care. We look forward to working closely with the Adeptus team and the dedicated physicians and medical staff working in its facilities to ensure that the Company reaches its full potential. Deerfield is committed to support the Company with capital, healthcare expertise and operational support.”

Mr. Scott continued, “As always, our facilities are open 24-7, and we are continuing to offer rapid access to board-certified physicians on-site. Importantly, we expect to continue working with our vendors and supporting the medical staff in our facilities as normal throughout this process. We thank our incredible team members for their hard work and dedication to our patients.”

Adeptus Health Inc (OTCMKTS:ADPTQ) should be considered extremely risky and could be ripe for a serious pullback. There are opportunistic hedge funds entering the water who are betting that the debt restructuring and subsequent negotiations will leave the stock undervalued. This is a stock to watch, but forego hope of a serious turnaround, even if the company is still technically operational. For more news on Adeptus Health and other fast-moving penny stocks, please subscribe to below.

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