Q: WELL issued a release about problems with CircleMedical, a subsidiary. They are delayed in filing their financials which has caused WELL to be late. Can you explain the release and what it means/impact to WELL. How serious is this? What do you see the end result being? Would this change your favourable view of WELL?
5i Research Answer:
A delay is never ususally good news. But it is not always material. In WELL's case, Circle is not overly material to the company, representing less than 2.7% of EBITDA. The company also may be selling it. Considering management's past record, and history of successful acquisitions and generally managing the company very well, we (and we think investors) will largely forgive this incident. In terms of seriousness we would give it a 3/10, but it is not likely to improve sentiment much, especially with such a weak market backdrop to begin with.