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Metropolitan Health Networks Inc. Message Board

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  • stanu78 stanu78 Jun 30, 2008 6:30 PM Flag

    Just listened to the conference call

    Finally, someone who gets it (about the transaction). botonist (not saying that I agree with his others post but for this post I think he is accurate)

    I'll mention this first that I'm still long and strong. Now talking about the transaction:

    It's not $2000 per HMO member. As botonist pointed out, HUM is buying MDF's HMO business including the restricted cash that is allocated to MDF HMO by MDF (the HMO balance sheet including the liability) for $14M.

    The market is smart most of the time (and somewhat efficient). We've talked before that MDF PSN is worth about $1.8M and here we are. We said before that the HMO is probably negative (remember those who think MDF HMO member is worth $8,000 or $10,000 per member, now they know better from this transaction). In reality probably the HMO is really negative as they spend $30M to build the business and they probably will not receive too much 'net' money (as HUM use MDF own cash to pay part of the $14M purchase price)

    The way I see it, if the transaction consumated, MDF is paying $30M (the startup cost) to add 7000 PSN members. which is not ideal/cheap but better than nothing (or continue bleeding cash if they keep owning the HMO).

    All in all, though I'm sad to see that the HMO business isn't successful for MDF, I think it is a good decision to cut the HMO if they can't get it profitable. as it has been 36 months and the breakeven point seems to be a moving target. I was just hoping that the purchase price could have been more than $14M
    Not sure what will happen to the 2 prong strategy. will be interesting to hear the next earning result and earning call. and where do they want to go from here... and if they can continue to grow their PSN business.. let's say 5-6% per year (net of member attrition).. I am hoping they will be able to achieve that from the relationship with careplus and humana in this new newer markets..

    Maybe they lose the battle (and admit defeat on HMO by selling out) but hopefully they will win the war (MDF as a whole and back to just PSN business). It take a lot of guts and heart to admit that things are not working and let's not be stubborn and figure out a way on how to move on from here and then make the best from it.

    Sometime cutting your loss is necessary and a responsible thing to do (given the circumstances). but I hope next time they learn from this HMO experience and will be more careful in terms of starting a new business line and responding correctly to the progress of that business.

    I'm getting a bit philosophical here, as I've been owning and following MDF from a long time ago and definitely sad to see the HMO business is done for MDF.

    All the best to you all,

    Stan
    PS: also (now that the HMO will be out of the picture), it will be interesting on what they will use their cash for in the near future. maybe they can follow CNU path of acquiring other profitable PSN, provided the price is right and that it will be accretive, or buy back stock at $1.8 per share using cash that will be generated by operation next 12 months or so.

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    • Stanu said "Sometime cutting your loss is necessary and a responsible thing to do"

      too bad he has not learned from his own advice - long & strong for along time.

      • 1 Reply to brntotrade
      • Thanks brntotrade.

        I guess it's easier said than done :)
        Yeah I haven't sell although believing that without the HMO being profitable (and I assign the value $0 for the HMO instead of negative because I'm optimistic at that time), their value is about $1.8 per share in my opinion/to me. And I have shared this so many times here and I missed my chance to sell at $3 for two times and for $2.5 fo many more times. One of the reason I didn't sell is that, I thought the HMO will become successful and will make the stock price even higher than $2.50 for good. (such as $3-$4 range). I'm not much of a trader. it surely would have been nice sell at the high and rebuy at the low/dip (and do it several times)

        The only consolation price for me I guess, is the fact that I bought my MDF shares at 30 cents (which was quite expensive at that time because I waited too long and it just jumped form 6 cents to 30 cents in just a couple weeks). So all in all, I'm still at gain from today's price but not sure where it will go from here. I am hoping they will stay at $1.8 and maybe if they started doing some buy back like CNU, the stock might be $2+ again (only with new cash generated form operation though and not using up their current cash holding which I think should be reserved for some more time and see if there are any other opportunities out there)

        Still long and strong until I see there is a degradation in their PSN cash generation then I'm going to sell (as I bought at the first place for the cash cow potential, before they started the HMO).

        Stan

    • MDF...lol Well...the new medicaire bill is the only thing to save their ass.

    • "I was just hoping that the purchase price could have been more than $14M"

      If Humana hadn't lost over half of their market cap, I'm sure the price could have been a whole lot more than 14M. Humana cut a good deal, but I believe MDF got out of it what they needed also. That's a continued strong relationship with Humana.

      I'll say it again, I beleive this may have been the plan all along, but it just came to fruition at the wrong place and the wrong time. Considering the circumsatance, this may have turned out to be the best possible outcome.

      Rooky

      • 2 Replies to rooky_is_lucky
      • If this was the plan all along, then someone will go to jail since this was not what the owners (you and I) were told or lead to believe.

        $14 million is pathetic. I mean, why do this now? Why not 12 months ago or 12 months from now? This is the worst of times given the market caps of those involved and the uncertainty of the election. Ok, so maybe I just answered my own question.

        This also shows how little all of us know (including me) about the inner workings of mdf and the people involved.

        I'm disgusted.

        Cheers

    • How come when the first CEO was wrong he was fired

      When the second CEO was wrong he was fired

      Why is Mike Early not terminated?

      • 1 Reply to skibum69ny
      • skibum,

        You have been a big loser from the get go. When Earley took over the helm at MDF it was trading at .30 a share, with no money in the bank, and an obligation to the IRS that lands some folks in jail (payroll taxes I believe).

        Your personal vendetta regarding Mike Earley is just that. By all rights you, the previous CEO, and the company should have all been bankrupt. You're just a jealous condescending nitwit, and thank god you're not running MDF or we'd all be bankrupt.

        Rooky

 

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