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On September 25, 2019, Spruce Point Capital Management, LLC (“Spruce Point”) issued a report about Premier stating that “due to a unique pre-IPO restructuring agreement, [Premier] is temporarily generating twice the earnings which its business model can sustain organically.” Noting that the contracts between Premier and its “member owner” hospitals were nearing expiration, Spruce Point asserted that “with most member owner equity now having vested, hospitals with expiring contracts are far less incented to remain with Premier at sub-market shareback rates” making them more likely to opt out rather than renew their contracts, which “would cause Premier to underperform FY22-23 consensus revenue by >26% and EBITDA by >50%.”
On this news, Premier’s stock price fell sharply to close at $30.75 per share on September 25, 2019.