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Elevance Health, Inc. last
month invested $35 million in GoHealth, an e-broker for Medicare Advantage
plans that has struggled this year and seen its stock market value plummet.
Michael Abrams, managing partner of Numerof & Associates, tells AIS
Health that the investment was “equivalent to a life-saver” for GoHealth.
GoHealth’s stock price is
down more than 90% this year
- GoHealth
received a total of $50 million from Elevance, with the other $15
million coming from a
company referred to as GH 22
Holdings, Inc. in an SEC filing.
- GoHealth has
seen its overall revenue decline this year. During the second quarter of
2022, GoHealth’s revenue was 19.4% below the same time
period for 2021. The company also lost $43.8 million in the second
quarter of this year compared with a $12 million loss in the second
quarter of last year.
- Through the end
of the trading day on Oct. 12, GoHealth’s stock was at 35 cents per
share, down nearly 91% since the beginning of the year and more than 98%
below its all-time high.
- Ari Gottlieb,
principal at consulting firm A2 Strategy Group, tells AIS Health that
GoHealth likely needed to raise capital considering it has been losing
money and looking to turn around its business. Elevance did not respond
to an email request from AIS Health explaining its rationale for
investing in GoHealth.
- Gottlieb,
though, says that “maybe [Elevance] was worried that without the
capital, the company was going to shut down. Given they drive a lot of
enrollment volume through GoHealth, especially going into the [Medicare
Annual Election Period], this may have been giving them some capital so
they can continue to operate this year, so it doesn’t disrupt
[Elevance’s] sales process.”
Investment could signal
future acquisition
- Gottlieb adds
that Elevance “may have just invested because it’s an attractive
investment. You have a stock that’s down [nearly] 99% from its high….It
may be as simple as, ‘We use them. We believe in this model. The stock
is cheap. Let’s participate in the deal.’”
- Based on
GoHealth’s stock price as of Wednesday, the company’s market
capitalization was just $53.6 million, meaning Elevance could easily
afford to buy the company if it wanted, according to Gottlieb.
- “That’s really
not much money for [Elevance],” Gottlieb says. However, he adds that, “I
don’t necessarily believe this is some prelude to a full acquisition by
[Elevance], although I think that could make sense.”
- GoHealth is not
the only e-broker to struggle this year. For instance, eHealth, Inc.’s
stock price was $3.27 per share as of the close of Wednesday’s trading,
down 87.8% since the beginning of the year, while SelectQuote, Inc.’s
stock price was 60 cents per share, down 93.6%. SelectQuote offers auto,
home and life insurance in addition to Medicare plans, while eHealth
focuses on Medicare.
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