Having investors on a bear hunt in your stock is both good and bad.
(To the right, from Google Finance, a one-year stock chart for Quality Systems Inc., one of the companies on the bear list.)
It’s good because speculators can, in the short run, bid up your stock and create a “short squeeze,” forcing out the bears and pocketing quick profits. This tension may keep your value up long enough for you to do something.
It’s bad because, well, a lot of people are betting your stock is overpriced, that your company is no good.
MySmartTrend recently checked in on where short interest is high in health IT, and two names stood out.
- Quality Systems has a niche in dental office systems, which it is seeking to expand through the NextGen product suite. Having an EDI solution also helps providers get paid.
The problem is that Quality’s products and pitches are a bit out of tune. They’re about getting paid, which was a big deal in the last decade, but now the focus is on meaningful use, of changing procedures through data, of saving money and securing that sweet, sweet stimulus cash.
In that kind of environment Quality’s wares look shopworn and a bit disjointed. Its medical records systems are not highly rated. It’s mainly selling systems instead of services. Some 5.3 million shares are now short in a stock whose daily volume is usually about 306,000. That’s 18.7% of shares outstanding. That’s a lot.
Of course there is value in Quality. Selling out to stronger hands based on real sales might create a real short squeeze, especially if they did it loudly, with some uncertainty as to the outcome. Or they could buy someone the bulls like — they’re still worth $1.72 billion.
- athenaHealth has built a successful business in getting people paid, and it’s trying to turn that into a stake in health records through Software as a Service (SaaS).
The problem is that, as commenters noted when I defended CEO Jonathan Bush recently, the company’s health record system is not highly rated. People don’t think much of its “strategery.” (Apologies in advance to anyone offended by my joke on Bush’s uncle W.)
The “short ratio” for athenaHealth is only 7 (less than half that of Quality), but those 9.1 million short sales represent 27.6% of the common stock. So nearly a third of the shares in this company have been sold without being bought, and as the old saying goes “he who sells what isn’t his’n must buy it back or go to pris’n.”
I was thinking out loud with a source recently, though. If athenaHealth’s problem is the quality of the health record software it’s offering, why not SaaS an open source system like OpenVistA or OpenEMR? The community would welcome it, you’d be more in touch with standards, and you could still drive meaningful use in fiscal 2011.
Just a thought.
Other companies on the health IT short list are CPSI, a full service medical records vendor; Cerner, one of the biggest of the old-line hospital software vendors; and SaaS vendor AllScripts, which SmartTrend brags has fallen by a quarter since it put out an alert against it in February.
Feel free to say what’s wrong with these last three companies in the comments.
