Insider Sales Cloud the Tenet Tale
By Melissa Davis Staff Reporter 11/14/2002 07:03 AM EST
Tenet (THC:NYSE - news - commentary - research - analysis) insiders have been blessed with more luck than some of the hospital chain's unfortunate patients.
A number of officers and directors at Santa Barbara, Calif.-based Tenet pulled off the stock market equivalent of a medical miracle this year, some of them selling their Tenet shares just weeks before the company took a drastic turn for the worse. Moreover, they claim to have done so without noticing any troubling symptoms at Tenet.
But by October's end, Tenet's ills would be on display for all to see. Reports of unnecessary surgeries at one Tenet hospital and aggressive Medicare billing at others shocked Wall Street. Prominent executive departures and sharp analyst downgrades followed, amid rising concerns about where Tenet would find earnings growth. The company's shares, which traded for $50 as recently as Halloween, have lost two-thirds of their market value in just two weeks.
Lucky for insiders such as former Sen. Bob Kerrey, now a Tenet director, the fall hasn't been equally painful for all Tenet investors. The Democrat from Nebraska netted $850,000 selling Tenet stock in transactions on Oct. 4 and Oct. 8 -- and he wasn't even the biggest or the timeliest seller. Fellow director Maurice DeWald, a former auditor and current chairman of a California investment firm, sold $382,500 worth of Tenet stock eight days after Kerrey's last transaction. And Tenet's operating chief made millions selling stock just a month before he left the company.
Despite their uncanny timing, the insiders stress that they were unaware of any problems when they made their sales. "My financial adviser said I should not hold any more than half of my options at any one time," said Kerrey. "So I left half and sold half."
But now, with Tenet knee-deep in investigations and investors questioning the credibility of a company that has come under fire before, the insider sales give investors yet another reason to turn their backs on this already struggling stock.
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