What happened

Shares of Cano Health (CANO) were skyrocketing 45% higher this week as of the market close on Thursday, according to data provided by S&P Global Market Intelligence. The big gain came after Owl Creek Asset Management sent a letter to Cano's board of directors to push them to sell the company to a strategic buyer. 

So what

Owl Creek owned nearly 3.75% of Cano Health's Class A shares as of Aug. 19. The investment fund manager stated in its letter to Cano's board that "the past year's roller coaster of accounting issues has shaken our confidence." Earlier this year, Cano delayed its fourth-quarter and full-year 2021 earnings release after an audit identified issues related to revenue recognition.

Cano Health went public in June 2021 following a merger with special acquisitions company (SPAC) Jaws Acquisition. Its shares had fallen 68% since the transaction prior to this week's gains.

The company is a value-based primary care provider that also focuses on population health. Cano reported revenue of $689.4 million in Q2, up 101% year over year. However, it posted a net loss of $14.6 million. 

Now what

Cano Health's board has not responded publicly to Owl Creek's letter, but chairman and CEO Marlow Hernandez stated in the company's Q2 conference call that Cano is "open to considering all strategic alternatives that allow us to accelerate value creation." Owl Creek specifically referred to this comment in its letter, noting that the remark was encouraging.

Regardless of which direction Cano goes, it seems likely that its membership will continue to grow. The company could also see bottom-line improvement if its medical cost ratio for Medicare Advantage and Medicaid members decreases as anticipated.