QIPT’s Share Price Drop Not All ATM-Related
The share price of Quipt Home Medical ( QIPT 0.00%↑ ) has been decimated the past couple of weeks despite their outstanding earnings report and forward guidance. The common explanation seems to be that the share price dropped due to the company issuing a $40M ATM authorization even though the company explicitly stated in the press release and on the call that they have no immediate intent to use the ATM—it is merely a housekeeping matter and another tool in their kit for future potential acquisitions.
Although I argued the immediate selloff was irrational, it was understandable given that most investors do not know this company well. Therefore, multiple investors were concerned the company might actually be using the ATM currently. As the stock has continued to drop, I have been contacted by multiple investors concerned that the reason for the selloff is that the company is actually actively using the ATM to sell stock into the market. Because of this concern, I decided to issue this brief update to provide you with three reasons I believe the stock is selling off right now.
Concern the company is or will soon be using the ATM. After checking with trusted sources, I am comfortable stating—on the record—that there is ZERO chance the company is using the ATM right now. ZERO. As the share price drops, investors tend to speculate, and the current speculation seems to be QIPT must be using the ATM. They. Are. Not. Nor, in my understanding, do they have any immediate plans to use the ATM. Remember: this company has issued equity once in the past three years, and only then because of the largest acquisitions—BY FAR—the company ever made. They are not using the ATM currently. So, why is the share price dropping?
On top of this ATM speculation, there are rumors circulating that in the event of a government shutdown/delayed debt ceiling resolution, CMS payments could be cut. According to people familiar with this industry with whom I have spoken, this persistent (albeit inaccurate) rumor has caused some investors to flee the healthcare/DME space for the time being. You can see that companies like VMD and AHCO—often used as comps for QIPT—have also suffered recently, presumably (according to my sources) for this same reason/concern/rumor. My understanding is that CMS payments for QIPT’s services would not be harmed in the case of a government shutdown/delayed debt ceiling resolution. Yet, because of the persistent rumor, some websites/companies are addressing this rumor head-on, as you can see here.
Perhaps most importantly, I heard there could be a large (though non-filing) holder of QIPT who has been aggressively selling the stock into the market. I believe this seller did not like QIPT raising equity in April and has decided to minimize the position or, perhaps, sell it all.
Taken together, I believe these three reasons account for the majority (if not the totality) of the recent weakness in QIPT stock. Despite this sell down, the company is quite clearly financially and operationally stronger than ever. They continue to have a robust pipeline of acquisitions that they will purchase at attractive prices and integrate well into their current operations. The company is now trading below the valuation metrics they paid for a much smaller business (Great Elm) to begin the year. Eventually, the selling will subside and the share price will likely begin to normalize throughout the year, likely buoyed (if history is a good indicator) each time they make another acquisition. For this reason, I believe acquiring QIPT shares now will pay off in the months ahead.
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Author’s Disclosure: I have a beneficial long position in the shares of QIPT either through stock ownership, options, or other derivatives. I wrote this post myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. I am not a licensed securities dealer, broker or US investment adviser or investment bank.
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