A Boston hedge fund with a track record for investor activism in healthcare has accumulated a 5.8% equity stake in struggling Community Health Systems.
North Tide Capital is now the hospital chain's third-largest shareholder with 6.5 million shares all purchased within the past six months, a recent regulatory financial filing shows. The fund is managed by Conan Laughlin.
North Tide was the group behind a recent major shakeup of Healthways' management and board of directors. In 2014, Laughlin led a successful proxy fight for board seats at Healthways, a leading disease management and population health company that North Tide said was underperforming.
North Tide eventually installed three board members at Healthways and saw the resignation of long-time CEO Ben Leedle Jr. last year. Laughlin remains on the board of Franklin, Tenn.-based Healthways.
Laughlin did not return phone calls Friday. Efforts to reach CHS were unsuccessful. Their offices were closed Friday in observance of Good Friday.
North Tide noted its increased stake in CHS in a Form 13G filing with the U.S. Securities and Exchange Commission this week.
The fund bought 3.5 million common shares of CHS in the first quarter to go along with 3 million purchased late last year.
Typically, a Form 13G connotes a passive or friendly investment not aimed at changing management or board control.
But CHS, the nation's second-largest publicly traded hospital company, has exhibited over several months the kind of depressed earnings and stock price that has given rise to investor activism at other healthcare companies.
Just this year, Tenet Healthcare created two board seats for activist investor Glenview Capital Management after the fund acquired 18% of the hospital chain's shares. Tenet CEO Trevor Fetter said there was a mutual agreement to try to improve shareholder value.
And this week, TeamHealth, the giant physician staffing company at hospitals, agreed to three board seats for New York City hedge fund Jana Partners.
One of the Jana representatives at TeamHealth is former CVS Caremark Chairman Edwin Crawford, who North Tide initially pitched in 2014 for a board seat at Healthways. That seat ultimately went to another North Tide representative.
CHS' stock has not regained traction after the company posted net losses in the fourth quarter and missed analyst expectations.
Shares of CHS closed at $17.14 Thursday. About nine months ago, the company's shares stood at $64.
The system posted a net loss of $83 million, or 73 cents per share, in its fourth quarter, compared with net income of $100 million, or 88 cents per share, in the prior-year quarter.
Revenue in the fourth quarter fell to $4.8 billion from $4.9 billion the year earlier. The financials badly missed analyst expectations. Following the news, a number of analysts downgraded CHS stock, including Jefferies and Mizuho Securities.