Activists Swarm Around eHealth (EHTH) as Company Attracts Second Activist Just Weeks After Coming to Terms with the First One

March 23, 2021 11:16 AM EDT
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eHealth (NASDAQ: EHTH) picked up a second activist investor just weeks after entering an agreement with the first activist investor, Hudson Executive Capital LP, to add two to the board. Now Starboard Value, which has amassed a 6.9% stake, wants to add another four to the 10 person board.

Starboard disclosed in a 13D filing after the close Monday that it started to accumulate shares of the health insurance exchange in late January and put forth the following four names to be added to the board: Peter A. Feld, James E. Murray, Erin L. Russell, and Steven J. Shulman.

Gordon Haskett's Don Bilson points out that two of the nominees (James Murray and Steven Shulman) have a strong connection to Magellan Health (NASDAQ: MGLN). Murray is currently the President and COO of Magellan, while Shulman, Managing Partner at Shulman Family Ventures, has served as the Chairman of Magellan Health since 2019, and was CEO in the past. This is important as Magellan was a past Starboard activist play and in January agreed to be acquired by Centene (NYSE: CNC).

"Given the fact that UnitedHealth bought one of EHTH’s peers (HealthMarkets) in 2019, nobody should be surprised if EHTH also finds a new home," Bilson speculates.

Sector analysts were also positive on the Starboard action, combined with the recent Hudson news.

"With the two reputed activist investors now involved with some high profile Board nominees, and some positive operational updates from EHTH at a recent conference, we now have increased confidence in the company’s execution and see upside to our estimates," Credit Suisse analyst Jailendra Singh commented in a note to clients this morning. As a result, he raised his price target on the stock to $78 from $63.

Singh said consolidation among e-Brokers is unlikely, pointing to recent comments from GoHealth, Inc. (NASDAQ: GOCO) at a virtual NDR last week, that "acquiring another e-Broker is not at the top of management’s mind at this point." That said, the analyst said with H.I.G Capital now involved in EHTH, the likelihood of a potential private equity transaction, "cannot be ignored." The analyst points out that Madison Dearborn Partners, a PE firm, bought Benefytt Tech last year.

Craig Hallum analyst George Sutton views the swarm of activist activity as a clear bullish signal that there is significant potential value within the online-focused insurance broker and that meaningful changes are underway.

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