Enhabit Rhetoric V Reality

Good and bad news for EHAB owners

Enhabit (EHAB) has done well since my recent coverage of this troubled spin-off:

However, recent gains will be lost (and more) tomorrow if shareholders fail to replace the board. Today, shares cost around $10, are worth at least $12 if shareholders win, and $17 as a deal target. But the market is a discounting mechanism so that even the $10 price takes into account some hope that tomorrow’s vote will be a success. The current board and management are responsible for disastrous performance over the past few years. They had their chance and they lost over half of shareholders’ money. If they keep their roles, they could lose over half of shareholders’ money again. Since I last discussed this position, the company put out yet another press release. In it, they state that,

… our CEO has serious concerns about continuing to serve under the “Transformation Committee” as proposed by AREX.

Good. The sentiment may well be mutual. This threat (promise?) is revealing. If management is unwilling to operate under real oversight tomorrow, then they shouldn’t be in charge today. Let’s get a management team proud of their decisions and performance. Let’s get one willing to work with a refreshed board on behalf of the owners. Enhabit’s incumbents go on —

Given the nature of the experience of the individuals and the initiatives in AREX’s “plan”, we do not believe this committee would operate as anything short of a shadow management team, likely with some degree of executive authority.

I agree 100%. Good. This is exactly what’s needed and why I expect most independent shareholders to support the Arex slate. Before you vote, make sure that you’ve read the case made by your fellow shareholders:

Disclosure: I own EHAB shares that I voted in favor of the Arex slate.