{ "docId": "019dd923-622c-750b-8b97-1ab4276c66b3", "docSlug": "cc2ab32a5b10", "documentTitle": "MultiPlan Corp (MPLN)", "authorId": "51_Muddy_Waters", "authorName": "Carson C. Block", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2020-11-11 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 13, "pageCount": 14, "prevPage": 12, "nextPage": 14, "slideType": "appendix_disclosure", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 6, "notes": "Contains detailed footnotes referencing SEC filings and external news sources.", "elementsJson": [ "paragraph", "footnote" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b97-1ab4276c66b3/13", "deckHref": "/decks/019dd923-622c-750b-8b97-1ab4276c66b3", "deckJsonHref": "/decks/019dd923-622c-750b-8b97-1ab4276c66b3.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b97-1ab4276c66b3#slide-13", "components": [ { "bbox": null, "kind": "callout", "text": "We view this as a reflection of management’s deteriorating confidence in the base MPLN business.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-3f3c-7011-a9a4-0cf216df7682", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.78, "x": 0.11, "y": 0.16 }, "kind": "paragraph", "text": "MPLN revealed what its acquisition strategy really looks like on November 10th, when it announced that it had bought a Medicare-based claim pricing company called HST for $140 million. HST uses Medicare as a reference price for claims and provides patient advocacy services to improve the member experience. To us, the HST purchase looks pricey: MPLN is paying $250 for each of HST's ~550,000 covered lives. Ironically, HST's CEO seemed to trash MPLN's business model on a recent podcast when he said that HST uses per-employee-per-month pricing instead of taking a percentage of savings because \"If you look at how these bills are inflated, in many situations...the vendor fees can actually exceed the medical cost of care. One, it's absurd, and two, it basically obviates the purpose of any type of plan like this.\"", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "0bd0205e-8139-445a-a0a1-a6faed5ff59b", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.78, "x": 0.11, "y": 0.09 }, "kind": "paragraph", "text": "We believe that this disclosure change serves as an admission that achieving the midpoint of MPLN's 2021E forecast requires consummating one or more acquisitions. We view this as a reflection of management's deteriorating confidence in the base MPLN business.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "82840188-827d-494b-934e-45e0c0889b2e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.16, "w": 0.78, "x": 0.11, "y": 0.47 }, "kind": "paragraph", "text": "Several additional signs indicated that MPLN was pressed for strategic options. Per the MPLN merger proxy, the first time Churchill approached MPLN in March 2020, MPLN was contemplating a transaction \"between MPLN and a third party\". However, by the time talks restarted in late April, there was no longer a mention of such a transaction. Meanwhile, though Churchill had initially suggested an EV of ~$12 billion for MPLN in March, in mid-May, Churchill floated a revised offer of ~$11 billion, which MPLN ended up accepting. As a result of MPLN's declining business, debt markets had priced in significant refinancing risk prior to the Churchill merger announcement, with MPLN's 7.125% OpCo Notes due 2024 trading at 93 cents.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "be62660d-61ae-4827-843a-ae33ba809018", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.11, "w": 0.78, "x": 0.11, "y": 0.65 }, "kind": "paragraph", "text": "Although MPLN has made much of the fact that H&F is rolling the majority of its equity stake into the public company, this ignores that H&F has reportedly taken a significant chunk of its investment off the table already, as discussed above. We find it telling that Churchill's preliminary proxy statement notes its valuation for MPLN was underpinned by the assumption that \"H&F and other MPLN shareholders would rollover a significant stake of their equity in MPLN Parent in the transaction\"; accordingly, we wonder whether H&F would have liked to sell more of its MPLN stake but could not because the optics would have been poor.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "da6fd104-e9f5-4c92-a0f0-b5ca88c67bac", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.07, "w": 0.78, "x": 0.11, "y": 0.39 }, "kind": "paragraph", "text": "It appears that a SPAC was H&F's Plan C at best. We learned in conversations with former MPLN executives that under H&F's ownership, MPLN attempted to acquire Equian, a health payments business. This apparently failed when UHC bought the company. A planned merger with healthcare analytics firm Cotiviti reportedly also fell through.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f8494ed2-052b-475b-b266-8cb0e2cecd7b", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "“If you look at how these bills are inflated, in many situations...the vendor fees can actually exceed the medical cost of care. One, it’s absurd, and two, it basically obviates the purpose of any type of plan like this.” — HST CEO", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-3f3c-7011-a9a4-13e7a9488668", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.1, "w": 0.78, "x": 0.11, "y": 0.79 }, "kind": "source-note", "text": "Footnotes 26-31", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "5a97b43f-a73b-43e7-ad83-f9f52e9d18bf", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.45, "x": 0.11, "y": 0.36 }, "kind": "title", "text": "A SPAC Appears to Have Been H&F's Last Choice", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "61de02fd-9afa-49eb-8d2a-257569699b4e", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }