The comp managed care marketplace has been changing rapidly, and no company has been more affected than CorVel. It looks like the company has decided to switch rather than fight.
Why?
Remember CorVel is publicly traded, and although it is enjoying a very healthy PE of 21+, the stock price has been slashed in half from it’s previous high at the end of 2006.
And by all accounts founder and Chairman Gordon Clemons is not particularly interested in sticking around too much longer. Which makes the “strategy” somewhat more apparent – CorVel is looking to differentiate itself from much bigger and stronger and/or more nimble competitors in the minds of those in the investment/private equity community. I’m speculating that the goal is a takeover or buyout or merger.
But that requires the potential investor(s) to buy into the strategy. While it is way too early to tell (the deal was only announced Monday, and there may be more acquisitions in the offing) , so far the equity markets have not been rewarding CorVel by bidding up the stock price. After the annoucement on Monday of CorVel’s acquisition of the Baltimore-based TPA, the stock price continued its decline.
It remains to be seen if this will work. It is a very risky strategy, as the company is going to continue to lose current customers while it transitions to a new business model.
I agree CRVL is ready for a buyout or merger. Why did they lay off over 100 employees at the end of February? Because their stock took a tumble. Gordon Clemons is ready for his golden parachute and Gordy Clemons will leave the pieces.