What’s Going On with the Estia Health Share Price?

What happened to the Estia Health share price?

For those who believe you should never buy into an IPO being offloaded from private equity, the tale of aged care provider Estia Health [ASX:EHE] will only reinforce that belief.

Shares in Estia’s IPO were offered to investors at $5.75 when it floated in December 2014. However, the share price tanked from its listing, trading as low as $4.25 over the following months.

Ambitious growth targets, supported by the trend in an ageing population, fuelled Estia’s share price to hit a high of close to $8.00 by the end of 2015. But, since then, it’s been a one way street, with shares now trading at $3.00.

Why did Estia Health do this?

There are two things that have contributed to this massive fall. First, the decision by the government to disallow some of the fees aged care providers were charging their clients — specifically, capital refurbishment fees. That meant a hit in revenues for the sector. With the Estia share price already trending downwards, this exacerbated the move.

The second was its recent profit downgrade for 2017, which saw the share price take another blow. Along with the bad news, the CEO, CFO and other board members have departed the company over the last couple of months.

What now for Estia Health?

Estia’s Chairman will be in for a grilling at the company’s AGM scheduled for 23 November. Among the items up for discussion will be his review of Estia’s financial health — in particular, whether it might be forced to undertake a capital raising.

But it might not all be bad news. The Financial Review recently reported that billionaire Kerry Stokes has built up a small stake. Of course, that is just speculation. But it might make some of the short sellers in the stock re-evaluate their positions, taking some pressure off the share price for now.

Matt Hibbard,
Money Morning

Money Morning Australia