Friday, June 14, 2024


Dhaka Tribune

Cano Health (NYSE: CANO) stock should rise 10,000% - in fact, it fell 25%

We always need to be careful in distinguishing between nominal and real stock price changes

Update : 03 Nov 2023, 01:12 PM

Cano Health (NYSE: CANO) stock should have risen 10,000% or 100x last night. It actually fell 25%. Which we want to think of as being more true depends upon whether we want to look at nominal prices or real ones. As it’s the real ones that impact upon our wallets then it’s a 25% loss. As what’s on the ticker is nominal prices then it’s the 100x rise, minus the 25% loss, and therefore 7,500% up. This is not entirely simple but it’s not all that horribly complicated either.

Cano Health does: “Cano Health, Inc. provides primary care medical services to its members in the United States and Puerto Rico. It owns and operates medical centers enabled by CanoPanorama, a proprietary population health management technology-powered platform that provides the healthcare providers at its medical centers with a 360-degree view of their members with actionable insights to improve care decisions and member engagement. The company also operates pharmacies, as well as provides dental services in its medical centers.” The base problem with Cano stock is that Cano Health doesn’t do this very well. The latest price collapse came in early August when results were announced: “Net loss of $(270.7) million, compared to a net loss of $(14.6) million in the prior year, primarily driven by a higher operating loss, due to lower-than-expected Medicare Risk Adjustment (“MRA”) revenue, higher third-party medical costs, a change in the reserve for other assets related to MSP Recovery Class A common stock, a change in fair value of warrant liabilities, and higher interest expense” That dropped the CANO stock price by about 60% right there.

Cano Health stock price from Google Finance

The problem then becomes that the New York markets really just don’t like penny stocks. It’s not that all are frauds or anything, rather that if there is fraud and manipulation then it tends to be in penny stocks. Therefore the NYSE has a $1 minim bid price rule. Don’t meet that and you get thrown off the NYSE. This is easy enough to solve, simply state that 100 old shares become one new one - a one for 100 reverse stock split: “Cano Health, Inc. ("Cano Health" or the "Company") (NYSE: CANO) today announced that it completed a 1-for-100 reverse stock split”.

This doesn’t, not directly it doesn’t, change the market capitalisation of the company, just the number of shares that make it up. Therefore we should see the stock price react mechanically, up 100x or 10,000%. What we actually see upon completion is that 7,500% rise - that’s 25% down on that supposed mechanical change. So, the nominal price in CANO stock is up 7,500%, the real price change is down 25%. Solving that NYSE problem was not, at least at this stage, value additive therefore.

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