Muddy Waters New Short: eHealth

Short seller Muddy Waters said Wednesday it's shorting eHealth, Inc. EHTH due its accounting techniques which obscure what is actually an unprofitable business.

eHealth, Inc. provides private health insurance exchange services to individuals, families, and small businesses in the United States and China. The company operates through two segments, Medicare; and Individual, Family and Small Business.

MW is short $EHTH. In our view, it is a stock promotion. We believe its MA business is significantly unprofitable. Its Mark-to-Model accounting masks this. We estimate that EHTH loses -$402 per new MA member. https://t.co/QpKKwGivnc

— MuddyWatersResearch (@muddywatersre) April 8, 2020

"EHTH’s persistence assumptions in its LTV model seem highly aggressive when compared to reality," Muddy Waters wrote in its report. "After ASC 606 went into effect, member churn immediately skyrocketed. We conclude that EHTH is pursuing low quality, lossmaking growth while its LTVs are based on lower churn, pre-growth cohorts."

eHealth shares were trading down 16.65% at $97.45 at the time of publication on Wednesday.

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