Voce Capital Management, a San Francisco-based hedge fund, has asked air ambulance company Air Methods Corp. to consider selling itself to a private equity firm and escaping the publicly traded atmosphere.
Voce sent a letter to the company's board of directors Wednesday. Air Methods, based in Englewood, Colo., is the largest air medical transportation provider in the country. Voce owns almost 5% of Air Methods and said it is the company's sixth-largest shareholder.
The hedge fund said the company's public status has damaged its ability to make money and has eaten away at its stock price. Air Methods' stock finished Wednesday up 11.6% at $39.97, but it has slumped 9.2% so far this year. Before Wednesday's surge, Air Methods' stock was down almost 19% on the year. In the first half of 2015, profit at Air Methods was down slightly at $39 million on $501.9 million of revenue.
“While we continue to believe that Air Methods is a great business, it has become a rather crummy stock,” J. Daniel Plants, Voce's chief investment officer, wrote in the letter.
Air Methods relies heavily on government payers. Medicare patients represent about 35% of its air ambulance rides, and Medicaid accounts for about 25%. About 27% of transports come from commercially insured patients, who make up most of its overall patient revenue. The company has lobbied for higher Medicare reimbursement rates, to no avail yet.
Because Air Methods is a publicly traded company, its financial results “are available for everyone—including the commercial (payers) now responsible for the vast majority of its revenue—to dissect on a quarterly basis,” Voce said in the letter. The hedge fund said that diminishes Air Methods' pricing power.
Voce also made reference to a New York Times article from this year that featured Air Methods and its patients who were dealt $40,000 bills. Consequently, Air Methods has become “an irresistible target for such demagoguery,” the letter stated.
Voce estimated that Air Methods could fetch a price tag of $55 to $60 per share from private-equity firms, valuing a potential sale at almost $2.4 billion. Air Methods did not respond to a request for comment.
Air Methods CEO Aaron Todd said during this year's first-quarter earnings call that there are advantages to remaining publicly traded but also that going private has upsides for the company.
“When you're trading at a large discount to what private-equity transactions have recently manifest, I think the board will have to be very reflective of its many options,” he said.
