Change Healthcare Goes Public in $888 Million IPO

On June 27, Change Healthcare president and CEO Neil de Crescenzo rang Nasdaq’s closing bell to indicate the Nashville-based healthcare technology firm’s arrival on the public market.

The company priced its IPO at $13 per share, down from the expected range of $16 to $17 a share when the IPO was first announced. Change Healthcare ultimately raised $609 million from the sale of 49.3 million shares of common stock as well as $279 million through the sale of tangible equity units. The company is now trading under the stock symbol CHNG on the Nasdaq.

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Barclays, Goldman Sachs & Co. LLC and J.P. Morgan underwrote both the common stock and tangible equity unit offerings, with BofA Merrill Lynch, Citigroup, Credit Suisse, Deutsche Bank Securities, Morgan Stanley and RBC Capital Markets acting as joint bookrunners. Blackstone Capital Markets, Baird, Cantor, Cowen, First Liberties Financial, Guggenheim Securities, Piper Jaffray, SunTrust Robinson Humphrey, SVB Leerink, Wells Fargo Securities, William Blair, Drexel Hamilton and Siebert Cisneros Shank & Co., LLC served as co-managers for the offerings.

Change Healthcare was founded in 2017 to provide hospitals and other healthcare industry providers with data analytics and tools to improve clinical decision making, patient engagement and the billing and payment process. The company facilitated approximately 14 billion healthcare transactions valued at around $1 trillion last year—about a third of all U.S. healthcare expenditures.

Despite its rapid growth—or because of it--Change Healthcare has not avoided controversy entirely. A quick glance at the company’s financials seem to indicate that it is growing rapidly, with a 22 percent increase in GAAP net income between 2017 and 2018.

However, certain observers have alleged that the company has used its GAAP earnings to mislead investors. A number of factors ranging from new accounting rules and tax reform to integration costs and the sale of its Extended Care business have supposedly distorted the company’s GAAP earnings. Change Healthcare’s economic earnings paint a different picture, showing a 5 percent drop in cash flow from 2017 to 2018 rather than significant gains.

Despite this, Change Healthcare was able to complete a successful IPO. The company plans to use the proceeds from its IPO to pay back a portion of its outstanding senior secured term loan facility.