On February 14, 2017, Pomerantz LLP was appointed Lead Counsel in a class action lawsuit against Quorum Health Corporation (“Quorum” or the “Company”) (NYSE:QHC) and certain of its officers. The class action, filed in United States District Court, Middle District of Tennessee, is on behalf of a class consisting of all persons other than Defendants who purchased or otherwise acquired Quorum securities: (1) pursuant and/or traceable to Quorum’s false and misleading Registration Statement issued in connection with the Company’s spinoff from Community Health Systems, Inc. (“CHS”) effective on or about April 29, 2016; and/or (2) on the open market between May 2, 2016 and August 10, 2016, both dates inclusive, seeking to recover compensable damages caused by Defendants’ violations of the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934.
Quorum is an independent operator and manager of general acute-care hospitals and outpatient services in the United States, with facilities in 16 states. Quorum was spun off from CHS effective April 29, 2016. Under the terms of the spin-off, CHS stockholders who held CHS common stock as of April 22, 2016, the record date, received a distribution of one share of Quorum common stock for every four shares of CHS common stock, plus cash in lieu of any fractional shares. CHS’s stockholders owned all of the outstanding common stock of Quorum upon completion of the spinoff.
The complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) a number of Quorum’s hospitals were underperforming at the time of the spin-off from CHS; (ii) various other indicators of impairment existed at the time of Quorum’s spin-off from CHS; (iii) Quorum disregarded and/or failed to advise investors of the foregoing issues; and (iv) as a result of the foregoing, Quorum’s public statements were materially false and misleading at all relevant times.
On August 10, 2016, Quorum issued a press release and filed a Quarterly Report on Form 10-Q with the SEC announcing the Company’s financial and operating results for the three months ended June 30, 2016 (the “Q2 2016 10-Q”). In the press release and Q2 2016 10-Q, Quorum reported a substantial net loss and an operating loss for the quarter. Defendants blamed the large operating loss on the $250.4 million in impairment charges Quorum had taken in the quarter, including $45.4 million to reduce certain long-lived asset values in property, equipment and software; $5 million in goodwill based on management’s decision to divest certain hospitals; and $200 million related to the carryover allocation of goodwill at the time of the spin-off from CHS.
On this news, Quorum’s share price fell $4.99, or 49.8%, to close at $5.03 on August 11, 2016.