Suffering from deja vu…
A decade ago, I edited a bunch of stories about a company called WellCare, a fast-growing HMO that was based in Kingston, N.Y. Just looking at this press release from Feb. 1995 — the presence of the words “record results” are one of the simplest, yet best contra-indicators around — makes me kind of misty. That’s because as most people know, things began unraveling at WellCare in early 1996, after Barron’s published a highly critical article.
The 1994 and 1995 earnings were restated and the stock went into free-fall. This was before someone in a newsroom in Poughkeepsie had ready access to SEC filings and I vaguely remember a teary meeting with WellCare’s founder/CEO Edward Ullmann about how short sellers were attacking this plucky local company. In the end, Ullmann wound up resigning, the stock sank, lawsuits followed and in 2002, parts of the company resurfaced and went public as WellCare Health Plans (WCG) in 2004.
What brought this to mind now? The news the past week about WellCare, which has included federal raids, a fast-dropping stock price, and numerous lawsuits. The most recent SEC filing is here. The current CEO, Todd Farha, discussed many of these issues in a short address posted here on the company’s site last week and the company has established a special committee to look at the various issues.
While it’s true that building a strong brand name can be tricky, given what’s going on this time around, maybe the name WellCare really is bad luck.