Hedge fund manager Bill Ackman sent shares of UnitedHealth Group (NYSE:UNH) lower with a tweet alleging overstated profits, which comes as the health insurance company faces more scrutiny after the death of an executive.
What Happened: The health insurance sector faces pressure after the killing of UnitedHealthcare CEO Brian Thompson put a bigger spotlight on potentially high claim denial rates, with the alleged murderer accusing the company of prioritizing profits over people.
Ackman stirred further concerns for UnitedHealth Group with a tweet on Tuesday night.
"I would not be surprised to find that the company's profitability is massively overstated due to its denial of medically necessary procedures and patient care," Ackman said in the since-deleted tweet.
Ackman suggested he would short the stock if he still shorted stocks.
The hedge funder called on the SEC to investigate UnitedHealth Group.
Now, Ackman himself could face an SEC probe. The insurance company said they contacted the SEC with concerns about Ackman's post, as reported by Bloomberg.
"Health insurance has long been subject to significant regulatory oversight and earnings caps," UnitedHealth said in a statement.
The company said that people like Ackman claiming that insurance companies "can somehow over-earn are grossly misinformed."
Why It's Important: Ackman's assertion that profitability was "massively overstated" follows the company’s Jan. 16 earnings report.
The company has faced many questions about its profitability and its claims approval and denial process as alleged killer Luigi Mangione allegedly targeted Thompson and UnitedHealth due to the company's position in the health insurance sector.
UnitedHealthcare is the largest individual player in Medicare Advantage with 7.8 million members, the company’s latest earnings report revealed. The company also has 4.3 million members enrolled in Medicare supplement plans through UnitedHealthcare. It also has 3 million people enrolled in standalone Part D coverage.
Thompson’s death and the possible motive behind his killing have drawn scrutiny to the health insurance sector, including reports of high claim denial rates by companies like UnitedHealth Group.
UnitedHealth CEO Andrew Witty acknowledged the pressure on the health insurance sector during the company’s earnings call. The industry needs to be “less confusing, less complex and less costly” for patients, he said.
Mangione faces New York state charges along with federal charges. He also faces the potential of the death penalty if found guilty of first-degree murder on federal charges.
Mangione pleaded not guilty in New York on Dec. 23. He is expected to appear in federal court on Feb. 21.
UNH, DIA Price Action: UnitedHealth stock is down 1.6% to $536.70 on Wednesday. Shares hit a daily low of $521.91 before recovering slightly. The stock has traded between $436.38 and $630.73 over the past year.
The quick drop in UnitedHealth stock to open Wednesday's trading session also saw ETFs that track the Dow Jones Industrial Average like the SPDR Dow Jones Industrial ETF (NYSE:DIA) fall.
The SPDR Dow Jones Industrial ETF fell to start the day before recovering. The ETF is now up 0.3% on the day at the time of writing.
UnitedHealth is the second largest holding in the Dow Jones ETF and the second largest weighting of the index, which weighs stocks by stock price and not market capitalization.
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