Yahoo Finance reported:
Alignment Healthcare Inc, a healthcare platform backed by private equity firms Warburg Pincus and General Atlantic, said on Thursday it is aiming for a valuation of up to $3.56 billion in its initial public offering in the United States.
The California-headquartered firm is looking to cash in on the high investor demand for new stocks in the U.S. capital markets. .
Former Medicare Chief Dr. Mark McClellan is on the Alignment's Board of Directors. He holds 213, 682 shares with plans to sell 13,154 in the IPO. Alignment's S-1A assumes an $18 per share price.
That would value McClennan's holdings at $3.8 million and his sale proceeds would be $236,000. A portion of Alignment's bio is below:
Mark McClellan has served as a member of our Board since 2014. Dr. McClellan became the inaugural Director of the Duke-Robert J. Margolis, MD, Center for Health Policy and the Margolis Professor of Business, Medicine and Policy at Duke University in January 2016. He is also a faculty member at Dell Medical School at The University of Texas in Austin.... He sits on the Boards of Directors of two public companies, Cigna Corporation and Johnson & Johnson.
The bio failed to mention McClellan is a private equity underwriter (PEU) with The Blackstone Group and Leavitt Partners, founded by former Health and Human Services Chief Mike Leavitt.
McClellan and Leavitt gave advice on the future of Medicare payment systems in a STAT article in 2017.
Reform of a system that has existed for decades takes time and will require iterative improvement and learning.
In 2015 Leavitt Partners joined The Brookings Institute to form the world's largest Accountable Care Organization collaborative.
If former Medicare and HHS Chiefs can steer healthcare reform to private companies, in which they have equity stakes, then flip those companies, they too could become policy making billionaires.
It is clear that we can expect emphasis on needed payment reforms in areas of specialized care that account for substantial disease burdens and costs.
CMS could provide more support for state-led payment reform efforts that include public and private payers.Alignment Healthcare operates in three states, California, Nevada and North Carolina. The company plans to use IPO proceeds for general corporate purposes.
Interesting facts in the company's S-1A for this seven year old company include
As of December 31, 2020, we had a pro forma net tangible book value of $(4.0) million, or $(0.02) per share of common stock.
Total tangible liabilities exceed total tangible assets.
Existing shareholders have an average price of $2.52 per share
An $18 share price represents a 714% return. That's a PEU payday for a Medicare Advantage company with 81,500 insureds and 3% market share in their 22 counties. That's a handsome return given Alignment had net losses of ($44.7) million and ($22.9) million the last two years.
The S-1A gave the secret sauce for Alignment's assumed $18 valuation.
Our model is based on a flywheel concept, referred to as our “virtuous cycle”, which is designed to delight our senior consumers. We start by listening to and engaging with our seniors in order to provide a superior experience in both their healthcare and daily living needs. Through our AVA technology platform, we utilize data and predictive algorithms that are specifically designed to ensure personalized care is delivered to each member. When our information-enabled care model is combined with our member engagement, we are able to improve healthcare outcomes by, for example, reducing unnecessary hospital admissions, which in turn lowers overall costs. Our ability to manage healthcare expenditures while maintaining quality and member satisfaction is a distinct and sustainable competitive advantage. Our lower total healthcare expenditures allow us to reinvest our savings into richer coverage and benefits, which propels our growth in revenue and membership due to the enhanced consumer value proposition. As we grow, we continue to listen to and incorporate member feedback, and we are able to further enhance benefits and produce strong clinical outcomes. Our virtuous cycle, based on the principle of doing well by doing good, is highly repeatable and a core tenet of our ability to continue to expand in existing and new markets in the future.
The PEU model is based on manipulation and greed.
In 2014, we received a $125 million investment from General Atlantic, LLC, a global growth equity firm. In 2017, we also received a $115 million investment in an additional round of funding from Warburg Pincus, a global private equity firm.
Another Medicare Chief turned PEU served on Alignment's board:
In addition, Mr. Andy Slavitt formerly served as a director of the Company
Slavitt founded Town Hall Ventures, which raised its first fund focusing on Medicare and Medicaid in September 2018.
Turn over a PEU rock and you'll find a former Medicare Chief. I call this misalignment healthcare.
Update 3-18-21: I wondered how Dr. McClellan got appointed to the Alignment Board in 2014. His resume at Brookings provided the answer. McClellan served as advisor to General Atlantic and three other firms. General Atlantic invested in Alignment Healthcare in May 2014.
Another McClellan advised investment firm, Capital Royalty Group (CRG) put an undisclosed amount into Alignment Healthcare, .
He got on the Alignment board by virtue of his paid relationship with at least one PEU. IPO documents portray McClellan as an independent board member. That may or may not be the case.
After turning over one more rock I learned McClellan is an advisor to yet another PEU:
How many PEUs can contribute to the fortunes of a politically connected former public servant? The number may be unlimited.
