Tenet Healthcare's announcement last week that it would buy dozens of surgery centers sent the company's share price soaring, triggering a stock transaction that netted its CEO $9.6 million.
A trading plan Ron Rittenmeyer entered earlier this year held for the exercise and sale of options he received when he became interim CEO in 2017 if the Dallas-based company's share price surpassed $40. It did so on Dec. 10, the day Tenet announced plans to acquire up to 45 ambulatory surgery centers from SurgCenter Development for an estimated $1.1 billion in cash. That day, Tenet's stock price spiked 22.3%, from just under $35 at market close on Dec. 9 to $42.78 at close the following day.
Rittenmeyer's transaction, done under a Rule 10b5-1 investment plan, covered 408,526 shares and included the exercise of a derivative worth -$6.7 million plus a sale worth $16.3 million, yielding a net pre-tax payout of $9.6 million, according to a Securities and Exchange Commission filing. Rittenmeyer's attorney, Mark R. Jackson, filed the SEC notice on Monday evening.
Rule 10b5-1 plans defend executives against allegations of insider trading by creating a plan for future stock sales, according to the consultancy Baird. To be valid, Baird said the plans must be adopted while the executive does not possess "material, non-public information." The executive must also refrain from attempting to influence how, when, or whether transactions will be made pursuant to the plan.
Tenet spokeswoman Lesley Bogdanow wrote in an email that Rittenmeyer was not in possession of material, non-public information when he entered the plan. The $40 share price trigger represents a more than 50% increase in value from the date he entered the plan.
"Mr. Rittenmeyer had no control of the timing of the sale as it was based solely on the share price passing the $40 threshold," Bogdanow said.
The SurgCenter deal would grow Tenet's ambulatory portfolio to 310 facilities in 33 states. Tenet posted a $197 million net loss to shareholders from continuing operations in the third quarter, which ended Sept. 30, down from a $227 million net loss in the prior-year period. Rittenmeyer said on the company's third quarter earnings call in October that the third quarter was more difficult than the second because of a more than 60% uptick in COVID-19 patients.
