Two years ago at the JP Morgan Healthcare conference, a picture of athenahealth CEO Jonathan Bush using CPR in an attempt to save the life of a man who had collapsed on the sidewalk went viral. Now activist investor Elliott Management, led by Paul Singer, seeks to revive the cloud-based electronic health record vendor in the form of an unsolicited $6.9 billion offer for the company.
A letter posted on the investor’s website addressed to the health IT company’s board of directors from Elliott Management Partner Jesse Cohn flagged several problems the firm sees with the company’s strategy from the search for a new president, the way it has made cutbacks, product execution, and operating effectiveness, among others.
Unfortunately, we are faced now with the stark reality that athenahealth as a public-company investment, despite all of its promise, has not worked for many years, is not working today and will not work in the future. Given athenahealth’s potential, this reality is deeply frustrating, but the fact remains that athenahealth as a public company has not made the changes necessary to enable it to grow as it should and to create the kind of value its shareholders deserve.
The health IT business had a “weaker than expected” fourth-quarter last year, Bush said on a conference call with analysts in February. Under pressure from Elliott Management, athenahealth cut 500 staff to reduce costs.
Cohn also noted that athenahealth has struggled with executive staff turnover. Former CFO Karl Stubelis joined Arcadia Health Solutions, an EHR data aggregation and analytics business, in a similar role. Todd Rothenhaus joined The One Health Company after serving as chief medical officer at athenahealth for 6 years.
This is the second overture Paul Singer’s hedge fund business has made to athenahealth since November last year, according to the letter. Elliott Management also revealed the investor has amassed an 8.9 percent stake in the business.
The letter concludes by making a case for why taking the company private would be the best option for athenahealth:
The private market is an ideal setting for athenahealth and its
employees to focus on long-term strategic initiatives and pursue the Company’s broader mission without the distraction of quarterly reporting. We have made this Proposal in part because we strongly believe that going private gives athenahealth the best chance to thrive as a disruptor in the healthcare technology market.
Singer has a daunting reputation for being relentless. A Bloomberg article last year offered up some reasons why the firm is “the world’s most feared investor”. In his most notorious showdown, Singer fought the Argentine government for 15 years over its debt default, at one point impounding one of its warships. It will be interesting to see how athenahealth CEO Jonathan Bush and his business manage.
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