The board of Community Health Systems (NYSE:CYH) is facing pressure from one of its top investors to sack the chief executive officer Wayne Smith from the financially struggling company. The ASL Strategic Value Fund, which terms itself as the long-standing investor in CHS has publicly announced that the company’s board should replace Mr. Smith with immediate effect. They sent a letter to CHS on August 8 calling for the CEO’s ouster.
In the past recent years, CHS has been facing massive financial challenges mainly caused by huge acquisitions of Health Management Associates (HMA) based in Florida in 2014. The company purchased several hospital facilities across the country and has been selling off some of its hospital facilities to offset some of its accumulated debts.
Currently, the firm’s stock price is trading below $8, which is down by about 80% the same time two years ago. In the second quarter, CHS stated in their financial report that they had divested about 20 hospitals and plans are underway to add 10 more. The deal is expected to bring in over $1.5 billion additional revenue to the company.
According to ASL’s letter, the company’s executive has continuously failed to meet its goals in terms of revenue growth and this is attributed to the poor decisions made by the company on the acquisition of HMA which has significantly destroyed billions of dollars of the shareholders’ values as revealed in the recent financial reports.
CHS was made a public company in 2000 and since then, the shareholders have lost over 50% of their capital invested in the company according to ASL. In addition, during the same period, the CEO and other top executives earned total compensation packages of over $350 million and $500 million respectively which is almost the current capitalization of the whole firm.
ASL is now appealing to the board of trustees to kick out Smith and look for ways to recover the lost cash by holding the management accountable, from both the existing and retired executives.
