The findings of the independent review commissioned by a special committee of the Nobilis Health (TSX:NHC) board of directors vindicates the company against untoward accusations, says PI analyst Sheila Broughton.
In October, an anonymous post to the website Seeking Alpha from an author by the name of “The Emporer Has No Clothes” caused a sharp selloff in shares of Nobilis that caused the stock to be halted.The post called the company “significantly overvalued” and said insiders have cashed out more than $70-million through a combination of share sales and compensation. The post also said turnover at the CFO level was a “red flag”.
Yesterday, Nobilis released the results from the independent review it had commissioned, called the “Hopper-Davis” report. The report found accusations about the company’s level of acquisition vs. non-acquisition grwoth, the insurance coverage of AccuraScope procedures, CEO compensation, allegations of insider sales and auditor and CFO changes baseless.
“After examining all of the blogger’s allegations, including the five primary ones above, we have determined that the allegations are false, misleading, or without foundation. Moreover, given that we find other allegations are false or misleading, based upon all statements taken, all supporting documents reviewed and, on the face of the company’s securities filings, we find the blogger is not credible,” concluded the report.
“The Hopper-Davis report is further confirmation that the baseless allegations levelled against Nobilis are completely false,” said CEO Chris Lloyd. “We have no quarrel with legitimate questions about our business and prospects, and even legal short-selling. We do have a problem with individuals hiding behind anonymously written blogs engaging in what we believe may be a scheme to mislead investors and distort the truth.”
This morning, BNN reported that Nobilis was preparing a lawsuit and that Anson Investment Management would be named as the defendant.
Broughton says this is the outcome she anticipated.
“We had expected this outcome from the independent review and we reiterate our positive view on Nobilis based on its fundamental operations, results and our future expectations,” she said.
Broughton says she expects Nobilis will post adjusted EBITDA (excluding NCI) of $8.2-million on revenue of $56.4-million in its third quarter, which it will report on November 11.
In a research update to clients today, Broughton maintained her “Buy” rating and one-year price target of (U.S.) $9.50 on Nobilis Health.