GoHealth (GOCO) Accused of Misleading Shareholders
In September 2019, private equity firm Centerbridge acquired GoHealth for $1.1 billion in equity and cash. According to the complaint, GoHealth reported tremendous growth immediately following the acquisition in preparation for going public, representing that its business model was highly profitable and offered the best lifetime value of commissions per customer acquisition cost of any of its peers.
GoHealth conducted its IPO on July 15, 2020, selling approximately 43.5 million shares for $21.00 per share raising nearly $914 million. However, the complaint alleges that GoHealth’s IPO materials were negligently prepared and contained false and misleading statements. Specifically, GoHealth failed to disclose: (i) the Medicare insurance industry was undergoing a period of elevated churn, which had begun in the first half of 2020; (ii) GoHealth suffered from a higher risk of customer churn due to its unique business model; (iii) GoHealth could not retain its customers due to various external and internal factors; (iv) GoHealth had entered into materially less favorable revenue sharing arrangements with its external sales agents; and (v) GoHealth had projected these trends to continue and worsen following the IPO. By September 15, 2020, GoHealth closed at $12.53 per share – a more than 40% decline from its IPO price paid by investors just two months previously.
