After the earnings reports over the past four weeks, it was unclear whether the seniors housing sector had hit operational bottom or not. Unfortunately, Capital Senior Living’s share price is still trying to find a bottom. But November 19th’s low of $3.45 per share was also the lowest price in more than 10 years, when in March 2009 it hit a low of $2.36 per share. This is not what new CEO Kim Lody wants to see. It is not what shareholders are expecting to see.
In March of 2013, the shares hit a peak of $27.90, and hovered below that for the next few years. Acquisition activity was strong, and some shareholders thought they should sell and not wait to see higher values. Within five years, the shares went below $10, and then continued the slide to where we are today. Could this have been prevented? Only if the company had been sold. If to another public entity, they most likely would have suffered the same fate. If taken private, well, then that would have been someone else’s problem, and we probably would never have seen the worst of it without the public disclosures.
In today’s market, we still think they need to weather this storm and focus on operations. Yes, they could sell their real estate, but to what end? Yes, they could try to sell the entire company. But we have a lot more confidence that the price could be higher in a few years than we did when the price was $27.90 when some shareholders wanted to sell. Few people expected this seniors housing slump to last as long as it has, and for many it will not be over this year, and maybe not next year. At least management is not dealing with a proxy fight, but if the share price keeps on dropping, and goes below $3.00, watch out.
