The following is from Briefing.com, mentioned FPAM.
15:20 ET PHYCOR INC (PHYC) 8 13/16 -5 1/4. "Just get it out of here," institutional managers must be yelling to their traders. Shares of Nashville, TN-based physician practice management company have tumbled 37% on volume of 17.8 million shares (9.5 times average daily turnover) after the company lowered its per share earnings targets for the rest of the year by 10%. Deeper in the press release was PhyCor's plan to take a $65 million charge to restructure its service agreements with doctors. With the company also reporting in-line Q2 earnings of $0.22 a share, the news doesn't seem all than bad upon initial examination. But many of the investors who held shares of fellow physician-practice manage company FPA Medical (FPAM) were also holders of this stock. So unless you are familiar with the FPAM story, it is difficult to understand the effect this revelation of operational problems is having on investors. In mid-May, FPAM announced that it would take $200 million charge to for goodwill impairment, the writedown of shared risk and other receivables and severance payments. Within two months, the company announced its intentions to file for Chapter 11 Bankruptcy protection, effectively cancelling existing equity holder interests. FPAM shares are now worthless. Given these recent events, institutional investors simply can't afford to risk, or simply don't want to chance, experiencing an FPAM-type blow-up. If FPAM had not occurred, we doubt that PhyCor shares would have fallen more than 10% on this news. But when fear becomes a part of the investing process... (well you know what can happen) For the record, while almost half-a-dozen firms have booted PHYC from the portfolio today with downgrades, DLJ started coverage of the stock with a "market perform" rating, saying that it is taking a wait and see outlook, hoping that the company will successfully execute its business strategy. The firm set a price target of $18. What are the chances that PHYC will go under? Not very high. But two months ago how many people thought that FPAM would declare bankruptcy just a short time later? |
