Owl Creek Asset Management L.P. sent a letter to Cano Health Inc CANO board strongly encouraging the company to pursue strategic alternatives, including a potential sale. Owl Creek owns around a 3.75% stake in Cano.
According to the letter, the asset management says, "the past year's roller coaster of accounting issues has shaken our confidence. We feel that Cano's continued growth will require a larger and stronger vertically integrated partner with access to the capital needed to execute the company's business plan."
"Cano is close to achieving its 2023 targets a year early. We believe these results validate our view on the market opportunity and the company's ability to capture a meaningful portion."
"Unfortunately, Cano has consistently traded at a discount to its peers due to its SPAC heritage and heavy concentration in the South Florida market."
Owl Creek compares Cano with Oak Street Health Inc OSH and Agilon Health Inc AGL.
Oak Street and Agilon have an enterprise value nearly three times the high end of their 2022 revenue guidance of $2.145 billion and $2.635 billion, respectively. Despite Cano guiding to $2.85-$2.90 billion for FY22, it trades at under 1.3x.
Recently, Amazon.com AMZN announced to acquire 1Life Healthcare Inc ONEM for $3.9 billion, paying over three times this year's expected revenue. CVS Health Corp CVS was also an interested party for 1Life Healthcare.
CVS has stated since late last year that they have well over $10 billion to deploy towards strategic initiatives, with value-based care at the top of the list.
CVS has also been named a suitor for Signify Health Inc SGFY, with Amazon, UnitedHealth Group UNH, and Option Care Health Inc OPCH interested in the home-health-services provider.
If Cano had an enterprise value equal to three times this year's expected revenue, that would increase the valuation by more than $4.5 billion, equating to a share price of approximately $14.
Price Action: CANO shares traded 5.77% higher at $5.87 premarket on the last check Tuesday.
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