Stocks can fly up or down very quickly for many reasons, including rumors, analyst upgrades or downgrades, dividend increases or solid earnings reports that beat the Street.
But when a stock that has been sinking — both short and long term — suddenly soars 8% in one day on heavier than usual volume, it bears a closer look.
Here is one real estate investment trust (REIT) that soared 8% on Feb. 16. What in the world happened?
Medical Properties Trust Inc. MPW is a Birmingham, Alabama-based healthcare REIT that owns and operates 434 general acute care and other properties across the U.S. and in nine other countries. It has a total portfolio of $21.1 billion, and 62% of its properties are in the United States.
In 2022, Medical Properties Trust was out of favor with Wall Street. An article in The Wall Street Journal questioning a loan arrangement between Medical Properties Trust and Steward Health Services, its largest tenant, had driven the price down in the spring. The Street was worried that Steward might be on the verge of bankruptcy, and investors were disappointed with the lack of an immediate response by Medical Properties Trust management to the WSJ report.
Short sellers then piled in, forcing the stock price even lower. By the end of January, there were 102.7 million shares being shorted and a short ratio (the number of days it takes to cover all of the short positions) of 8.3.
Medical Properties Trust, which was $22 in January 2022, fell below $10 by October. After the Federal Reserve announced it would pull back from larger rate hikes, most REITs, including Medical Properties Trust, began to rebound. On Jan. 24, it touched $14 intra-day trading.
But in recent weeks, Medical Properties Trust had pulled back about 13%, and on Tuesday, Feb. 14, shares closed down 1.6% at $12.10.
Yet, about 20 minutes before Tuesday’s closing bell, heavy call option buying near the ask on the April 21 $12 strike was reported.
Ironically, the previous day, it was just the opposite as heavy put buys predominated with a put/call ratio of 1.87. The April $10 strike for puts and $13 strike for calls were the most active options. Investors seem to be hedging their bets almost daily.
And then came Wednesday. After opening lower at $12.01, Medical Properties Trust stock meandered sideways on low volume (about 80,000 shares per five-minute candlestick) until 11:20 a.m., when a sudden burst of volume lifted the stock higher by almost 2% within minutes. By 11:35 a.m., volume was surging over 1 million shares per five-minute candlestick.
The stock price continued climbing steadily, and by the closing bell, Medical Properties Trust had finished a penny below the high of the day at $13.13, a substantial one-day gain of 8.43% on volume of 59.7 million shares. Volume on several previous up days ranged between 20 million to 45 million shares.
There was no news on Wednesday before or during the trading day about Medical Properties Trust. So what could propel a stock up over 8% without any news?
The answer came 30 minutes after the closing bell. Medical Properties Trust announced it had agreed to lease its total Utah hospital portfolio to Catholic Health Initiatives Colorado (CHIC), after CHIC’s pending acquisition of the Utah hospital business currently operated by Steward Health Care System.
There were no details regarding the purchase price, but it was reported that Steward plans to use the proceeds of the sale to prepay loans that Medical Properties Trust had given Steward over the summer of 2022.
This is a game-changer for Medical Properties Trust, which has been heavily burdened by its complex financial ties with Steward for several months.
But this story hit the wire services after the closing bell. The stock surge occurred at 11:20 a.m., well before the announcement.
Medical Properties Trust’s fourth-quarter operating results are due on Feb. 23. The upcoming earnings report should provide some further clarity on the financial status of Medical Properties Trust. In the meantime, Medical Properties Trust is a stock to watch in the coming days.
Over the past five years, private market real estate investments have outperformed the publicly traded REIT market by about 50%. Check out Benzinga’s Real Estate Offering Screener to discover the latest passive real estate investments.
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