Brookdale Senior Living Inc. (BKD, Financial), the largest owner of senior living communities in the U.S., has seen its stock fall over 18% between Jan. 2 and Nov. 26. The company’s stock is down to $8.16 a share, falling from $10.18 to start the year.
Macquarie Investment Management, one of the company’s 10 largest shareholders, has urged other shareholders to consider selling off their stock.
Brookdale’s stock is down from 2015 highs when the company’s stock hit $38.74 a share, falling drastically during years when economic growth remained strong.
Macquarie says the company’s shares have fallen 77% from their peak during a time when senior-housing real estate values increased and financial performance has suffered. The shareholder claims Brookdale is trading at a 50% discount based on real estate value estimates. Management has been blamed for not aggressively taking advantage of opportunities to stabilize the business.
Valuation gap is a concern for investors, but so are concerns of elder abuse, which have hit the company’s Bakersfield senior rehabilitation facility. Elder abuse is on the rise, with quality of care dropping as 20% of Medicare patients discharged into nursing homes are readmitted in 30 days.
One of the biggest reasons for the company’s lack of growth is acquisition of competitors over the past five to 10 years. The acquisitions have led to underperforming assets and a lack of divesting of the underperforming assets.
Brookdale’s most recent quarterly earnings show a slight sign of improvement. The company posted a quarterly loss of 20 cents, down from 24 cents a year prior. The company posted a $37.1 million loss in the third quarter, and revenue reached $1.12 billion, down from $1.18 billion a year prior.
Resident fees slumped 9% due to the company selling off 104 communities.
Brookdale still managed to outperform the industry in the third quarter on a sequential basis.
Net cash remains a concern, as Brookdale’s net cash has dropped $21.9 million to $71.9 million in the most recent quarter.
The company has reported two straight quarters of losses, and any change from shareholder recommendations have been unrealized. Investors hope that new management will allow the company to return to prominence.
Brookdale has started to offload some assets, but signs of a sale of the entire company are nonexistent.
Working capital deficits remain a concern, with Brookdale having high leverage. The company’s assets that are for sale have a value that still keeps the company’s working capital in a deficit.
Disclosue: The author does not own any stakes in the listed equities
