Wellcare shares plunge 65 percent as filings delayed
CHICAGO (Reuters) - Shares of Wellcare Health Care Plans Inc (WCG.N) lost 65 percent of their value on Thursday, plunging to their lowest price ever, after the company said it is unable to file past quarterly financial reports.
In a government filing posted after the markets closed on Wednesday, Wellcare said it could not estimate when they would be filed. In a separate filing, the company said medical costs were up significantly.
The shares were down $13.00 at $6.87 on the New York Stock Exchange.
Wellcare, which administers Medicare and Medicaid programs for state agencies, has been under a cloud since October 2007, when federal and state agents raided the company's Tampa headquarters.
In the filings, Wellcare revealed weakening operations with declining margins. Medicaid performance is expected to deteriorate further as states cope with a recession, analysts noted.
The company said it was cooperating with ongoing investigations.
"We do not know whether, or the extent to which, any pending investigations might result in our payment of fines or penalties or the imposition of operating restrictions on our business; however, if we are required to pay fines or penalties, the amount could be material," the company said in the filing.
With regard to the Department of Justice's investigation into a number of whistleblower lawsuits against the company, Wachovia analyst Matt Perry said: "Given that Wellcare has admitted to essentially overcharging the State of Florida in behavioral health, the presence of employee whistleblowers is not surprising. These lawsuits can drag on for years and it's impossible to judge the merits at this point since they remain under seal."
In a research note, Perry also noted that Wellcare is in default on its senior credit facility of $153 million. The debt will become payable on May 13, 2009, but the lenders could accelerate the payback date and/or increase the interest rate. The company has engaged an investment bank to help it secure alternative financing, he added.
Carl McDonald, an analyst with Oppenheimer, noted that lower investment income has been a big drag on its earnings.
"Investment income will likely be down by more than 50 percent this year, costing the company about $40 million, or almost 60 cents per share," McDonald wrote in a note.
(Reporting by Debra Sherman; Editing by Brian Moss)
