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American Renal: JV Partners Rushing To Sell Equity Stakes, But Why?

Richard Pearson profile picture
Richard Pearson


  • ARA’s JV partners are suddenly exercising their put options nearly as fast as they vest, requiring ARA to buy out their equity stakes. The reasons are becoming clear.
  • Post Q1 news: Insurers now rejecting charitable assist on BOTH ACA AND non-ACA plans. Fraud lawsuit against ARA spurred federal investigations into “charities”, now from three separate federal agencies.
  • Hypersensitivity of ARA to several very small variables such as put exercises and commercial mix. Tiny changes are suddenly wreaking havoc on ARA.
  • ARA is merely an “also covered” stock. Analysts only focused on much larger competitors DVA and FMS, and have completely missed problems at much smaller ARA, which are very unique and very deep.
  • Base case decline of 60% to $7. But with $500 million debt + $132 million put liability, also a strong case for later insolvency (ala Adeptus).

The information below represents the opinion of the author. The author is short ARA.

Company snapshot

Name: American Renal Associates (NYSE:ARA)

Business: Dialysis provider

Share price: $17.36

Market cap: ≈$550 million

Debt: ≈$500 million plus $132 million in put liabilities to JV doctors

Borrow: At least 400-600k shares (up to $10 million)

Borrow fee: 0.90%

Options: Calls and puts


Right now, shares of American Renal Associates (ARA) are trading for around $17. If things go “better” than expected, then I expect that the shares may “only” fall to around $7 (down 60%).

But in reality, a more likely scenario in the foreseeable future is actual insolvency for this troubled dialysis provider. If that view sounds extreme to you, then just read on. I think you will see clearly what I mean below.

As I will repeat throughout this article: Do not believe me. Do not believe the sell side. Instead, look to ARA’s JV partners (insiders) who are now exercising their put options nearly as fast as they can possibly vest them.

Below I will spell out clearly:

  • Why things are so bad for ARA
  • Why they are much, MUCH worse for ARA than at DaVita (DVA)
  • How we KNOW with certainty that things are so bad at ARA
  • How we know things are unraveling NOW
  • WHY analysts and investors have missed all of this at ARA

In the past, my articles on multiple private equity backed IPOs ended up quickly presaging declines of 70-100% for stocks like Ignite Restaurant (IRG) and Erickson Air-Crane (EAC) (among others). With Erickson, the stock fell as much as 30% on the day of my article. But the pain was actually just beginning. The stock went on to be a true zero and quickly ended in bankruptcy.

My article: Massive Insider

This article was written by

Richard Pearson profile picture
I am an activist investor in US and Chinese stocks. I was previously an investment banker in New York Hong Kong and London for 9 years, focused on Equity Capital Markets. I look at both long ideas and short ideas and typically focus on a small number on names where I can spend the time to conduct very deep research. I spend my time living between Los Angeles and Beijing, China.

Analyst’s Disclosure: I am/we are short ARA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

This article represents the opinion of the author. The author is short ARA. The author may choose to conduct additional transactions long or short in one or more of the stocks or related securities mentioned within this article within the next 72 hours.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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