Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Athenahealth Is Skyrocketing Today

By Brian Feroldi - Updated May 7, 2018 at 12:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares jump after an activist investor makes a public offer to buy out the company. Here's what investors need to know.

What happened

In response to a buyout offer, shares of athenahealth (ATHN), a software provider to the healthcare industry, jumped 20% as of 11:05 a.m. EDT on Monday.

So what

News broke on Monday morning that Elliott Management, an activist investment firm with an 8.9% stake in athenahealth and $34 billion in assets under management, has made an all-cash offer to buy the company for about $7 billion. After accounting for the company's debt, that equates to a share price of $160, which represents a healthy premium to Friday's closing price of $126 per share. 

Elliott Management published a letter stating that athenahealth has underperformed in recent years as a direct result of its "inability to execute across a range of strategic and operational issues." Elliott Management believes that it will be able to address all the company's shortfalls and get it back on track by taking it private. Elliott has also stated that it has already lined up all the financing necessary for the transaction.

Athenahealth's management team quickly sent out a press release confirming that it had received the letter from Elliott Management and stated that it will "carefully review the proposal to determine the course of action that it believes is in the best interest of the Company and athenahealth shareholders."

Businessmen shaking hands and exchanging money

Image source: Getty Images.

Now what

While it is understandable that shares are soaring today from the news, it is hard to handicap the odds of this deal actually going through. Elliott tried to initiative takeover discussions with the company's management team back in November but didn't get anywhere. Elliott noted in its proposal letter than "athenahealth appears unable to achieve the right outcome for shareholders on its own," which is why it has now chosen to go public with its bid. The idea is to put pressure on management to force it to accept the deal.

At this time, it remains unclear whether or not this offer will be accepted or if another offer might appear. Investors would probably be best served by holding on to their shares until more information surfaces.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

athenahealth, Inc. Stock Quote
athenahealth, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.