Jehoshaphat Research Takes a Short Position on Premier Inc.

Jehoshaphat Research has taken a short position on Premier Inc, a healthcare company valued at approximately $2 billion. The research group expressed concerns about the quality of Premier's earnings and the sustainability of its business model. According to Jehoshaphat Research, Premier Inc's revenue recognition methods are largely based on forecasts of future contract performance, which could lead to inflated revenue recognition if optimistic projections are used. This claim is supported by interviews with former employees as well as a quantitative review of the company's financial statements and notes.

The analysis reveals a significant discrepancy between the Adjusted EBITDA reported by Premier and what Jehoshaphat Research believes to be a more accurate "cleaned" version that reflects the company's economic reality. According to their estimates, the adjusted figure could be approximately 40% lower than the current figures presented to investors. Additionally, Jehoshaphat Research points to a potential decline in Premier's free cash flows, suggesting that the expiration of long-term contracts with health systems could lead to member attrition and jeopardize the company's financial health.

The research group also highlights significant insider sales and departures of key executives over the past year, including the CFO, COO, Chairman, and several vice presidents. These actions are interpreted by Jehoshaphat Research as potential indicators of underlying issues within the company. They expect Premier to potentially reduce its guidance or miss earnings estimates in the upcoming quarters, which could lead to a contraction of the business and a normalization of revenue figures.