News Column

David Einhorn Shorts Athenahealth

May 6, 2014

Associated Press

Shares of Athenahealth plunged Tuesday after hedge fund manager David Einhorn said investors have vastly overvalued the maker of billing and medical practice management software.

The founder of Greenlight Capital, speaking at the annual Sohn Investment Conference in New York, said late Monday that the company's stock could fall as much as 80 percent from the all-time highs it reached earlier this year.

He also said that he was shorting the stock, making the bet that the price of the shares will fall.

Shares of Athenahealth Inc., which topped $200 in February and March, closed at $126.78 on Monday. They then sank 13 percent, or $16.47, to $110.31 in afternoon trading.

The Watertown, Massachusetts, company sells revenue cycle management services like billing product athenaCollector, athenaClinicals practice-management software, and athenaCommunicator software to doctors' offices. It uses cloud technology, which involves software delivered over the Internet instead of installed on company computers.

In a printed statement the company said, "Health care is desperate for disruptive technologies and (Athenahealth) is one of the few bright spots of innovation. We remain fully confident in our business model and growth projections."

Einhorn raised the issue of innovation, saying that Athenahealth executives compare it to other heavily invested cloud-technology companies like Amazon, which he calls a stretch. He also questioned Athenahealth's ability to compete against competitors like the privately held Epic Systems.

Wall Street analysts have championed the company for some time and shares have risen almost 50 percent over the past 12 months, and they have been climbing rapidly for five years.

Citi analyst Garen Sarafian wrote Tuesday that he still thinks favorably of Athenahealth and maintained his "buy" rating on the shares.

Sarafian expects the company's profitability to expand in the future, as costs tied to adding more providers to its user base decline and as a reduction in investments allows more money to flow through to earnings.

Sarafian also said that while Athenahealth and Epic have some overlap in their businesses, they focus on different segments, with Athenahealth targeting physicians, while Epic goes after hospital systems. Sarafian also said he sees "ample growth opportunities" for athenaCollector without encroaching on Epic's turf.


Original headline: Athenahealth sinks after hedge fund boss critique

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