Business & Tech

Activist hedge fund targets athenahealth, calling it undervalued

for Business - 23athena - Watertown, MA 6/15/10 Jonathan Bush is CEO of AthenaHealth. The company is trying to capitalize on the newly expanded health care insurance rolls to build a business providing electronic medical records for doctors. Employees at Athena are working on technology to make medical records more efficient. (Michele McDonald for The Boston Globe)
Michele McDonald for The Boston Globe/File 2010
Jonathan Bush is CEO of athenahealth.

One of Massachusetts’ best-known medical technology companies has grabbed the attention of a big activist investor — and for the wrong reasons.

Elliott Management Corp., a New York hedge fund controlled by billionaire Paul Singer, said Thursday that it had acquired a 9.2 percent stake in athenahealth Inc. Elliott called the Watertown company “undervalued” and said there are “numerous operational and strategic opportunities to maximize shareholder value.”

Shares of athenahealth soared more than 22 percent on the news as investors bet that Singer could agitate for a sale of the company or for changes aimed at lifting its lagging stock price.


Athenahealth sits at the nexus of health care and technology, providing electronic health record systems and other Internet-based software to doctors’ offices and hospitals across the country.

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It earned $21 million in 2016, up from $14 million the previous year, while revenue rose 17 percent to nearly $1.1 billion.

But the financial results have been below the expectations of analysts and investors, and athenahealth’s stock had lost 19 percent in the year before Thursday — compared with a 15 percent gain by the Russell 1000 index. The stock rose 22.4 percent Thursday, to $130.07, giving the company a market value of $5.2 billion.

The company is led by Jonathan Bush, a colorful CEO lauded for his bold vision of disrupting health care but also known for making flip, sometimes controversial comments.

In a 2015 Bloomberg interview, Bush said that he wasn’t worried about investors shorting his company’s stock: “You buy the stock, you don’t buy the stock, I’m already rich, who cares?” he said.


He also takes jabs at his competitors, even calling some of them obsolete.

Elliott said in documents filed with the Securities and Exchange Commission that it would seek a dialogue with athenahealth’s board about potential changes in operations and management. It declined to comment further.

Athenahealth spokeswoman Holly Spring said the company was aware of Elliott’s filing and looks forward to discussing how athenahealth is driving “enhanced growth and value creation” for shareholders. “We have great confidence in the Company and where we are headed,” she said in an e-mail.

Singer and his $33 billion hedge fund have acquired large stakes in and pushed for changes at several technology companies, including Gigamon, Citrix, and Hopkinton-based EMC Corp., which was later acquired by Dell Technologies.

Several of Elliott’s investment targets were later sold. At others, such as the aerospace company Arconic, Elliott has waged public campaigns to replace board members.


The hedge fund has a solid reputation in the investment world; it raised more than $5 billion in about 24 hours earlier this month, according to Reuters.

Singer’s firm made headlines for its 15-year battle with the government of Argentina over bond payments, including when it seized an Argentine Navy vessel for more than two months in Ghana before an international tribunal ordered the ship released, according to Bloomberg. After Argentina defaulted on its bonds, it offered to pay Elliott 30 percent of what the hedge fund was owed. Elliott refused. The dispute was settled in 2016 when the government and Elliott reached a deal that gave the hedge fund 75 percent of what it was owed.

At athenahealth, the firm will be up against a big personality in Bush, a cousin of former president George W. Bush, who cofounded the company in 1997 and took it public a decade later. Bush is considered a thought leader in the industry; he has written a book about health care and talks often about fixing America’s “broken” health system through better technology. He’s well-known in Boston and not at all timid, appearing shirtless portraying Vladimir Putin in a skit at a fund-raiser for a local nonprofit last month.

Analysts said Bush, who once declared that “the Street hates me,” is widely seen as athenahealth’s rightful leader.

“By and large, there’s a view that Jonathan is the right guy to drive this change,” said Sean Wieland, research analyst at the investment bank Piper Jaffray. “His passion and his commitment to the company is really refreshing. That’s not to say he doesn’t have his detractors. When you’re shooting for the stars every day, you’re going to fall short once in a while.”

Analysts at Baird Equity Research said they believe Bush “is integral to the company, making a wholesale leadership change problematic.”

Priyanka Dayal McCluskey can be reached at priyanka.mccluskey