So I assume John Garimendi went short on Wellpoint stock last week. The market marked Wellpoint down 7% on the opening on Monday following Friday’s hiccup in the merger process, but it ended down only 4%. I nearly bought some yesterday, but luckily I did not as today it’s down another 7% from roughly $115 last week to $98 now. So it’s on its way down to the $85 a share it was at when the takeover/merger was announced in November last year.
All of this sounds a little like a typical Wall Street overreaction. BC Life & Health only accounts for 10% of the California business of Wellpoint. Wellpoint’s 2003 10K (warning: huge file) showed that it had 15 million members nationwide with 6 million of those in California. So, back of the envelope, if BC Life and Health is 10% of 40%, it’s only 4% of the business. So it seems to me that they have their day in court and if they lose they prepare to very quickly spin it off, take it out of the merger and sell it. Business Word) have for a while said that health plan stocks were overvalued–although no one’s been listening to us! But it’s clear from the Anthem and Wellpoint management team that this merger is going ahead whatever it takes. If Wellpoint was worth $115 a share last week, it’s not worth only $98 with the cash from a sale of BC Life & Health rather than the small business it gets from it. That doesn’t make logical sense, but then again when die Wall Street ever make logical sense?
I (along with Don Johnson at the