October 10, 2022
Facing a lawsuit and enrollment caps, a local senior-care company tries to make a comeback.
During InnovAge’s Sept. 13 earnings call, CEO Patrick Blair spoke like a man who was watching a family member recover from a serious illness. In this case, however, that family member was the Denver-based senior-care company that Blair runs.
In early March of 2021, InnovAge (Nasdaq: INNV) was a company drawing all sorts of positive attention. It had just gone public, garnered an enterprise value of $3.75 billion and come off a five-year period in which revenue grew by 143%.
But on March 10 of that year, the Colorado-born company that had started life as nonprofit Total Longterm Care received a letter from the Colorado Department of Health Care Policy and Financing saying it had gotten a complaint about its Thornton facility. The complaint alleged that clinical staffing at the center was “dangerously low,” caseloads were far too high and preventable acute medical issues had afflicted multiple patients at the facility.
A year and a half later, shares that once traded at $25.98 reached a nadir of $3.50. InnovAge patient enrollment is frozen in Colorado, where 47% of its business resides, as well as in Northern California, until it completes corrective action plans. And the company is the subject of a civil lawsuit filed in the U.S. District Court of Colorado by three investor public pension funds that claims officials, including a departed CEO, made “materially false and misleading” statements about the company that caused investors to put their money into the firm only to lose millions of dollars as its value plummeted.
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“I think what our complaint does show is there were systemic issues well before they did the IPO,” said Julie Goldsmith Reiser, a Washington, D.C., attorney who is leading the team seeking unspecified damages from the company, its current and former leaders and firms that aided it in going public. “My parents live across the country from me. I’m the type of person who could use this solution … To me, that’s why it’s important to get this story out.”
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Reiser, who filed the lawsuit, said it aims to recover the money lost by investors who bought into “one of the five worst-performing IPOs in 2021” and suffered because of what she claims was “a materially inaccurate registration statement and prospectus.” But she believes that the people speaking out through her efforts will hold sway on the federal and local agencies seeking to get InnovAge to change its practices — and fulfill the promises it’s made to frail patients and their families.
“I believe when you have regulatory agencies as involved as we have here … the amount of pressure that shareholders can exert is less than those regulatory agencies,” she said. “InnovAge will have to address those regulatory concerns if it wants to be viable.”
Read the article on the Denver Business Journal. (Subscription required.)