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#1
06-05-2007, 11:00 AM
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HLTH & WBMD Spread Idea
I was doing some research for my internship today and came across and interesting stock idea.
WebMD currently has a market cap of $2.9b, and yet its parent company HLTH Corporation only has a market cap of $2.5b. HLTH was several other holdings than WebMD and thus has nearly 4 times the revenue of WBMD and 3 times the EBITDA. I haven't been able to do enough research, but this seems like a potetntial opportunity for playing their spread by shorting WebMd and going long on HLTH. Any thoughts. 
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#6
06-06-2007, 04:41 PM
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Re: HLTH & WBMD Spread Idea
[ QUOTE ]
WebMD currently has a market cap of $2.9b, and yet its parent company HLTH Corporation only has a market cap of $2.5b. HLTH was several other holdings than WebMD and thus has nearly 4 times the revenue of WBMD and 3 times the EBITDA. I haven't been able to do enough research, but this seems like a potetntial opportunity for playing their spread by shorting WebMd and going long on HLTH. Any thoughts. [/ QUOTE ] I don't think there is much spread here. First, HLTH incorporates all of WebMD's revenues/earnings and assets/liabilities on it's own books. So HLTH doesn't have 3x the EBITDA of WebMd, in fact, WebMD supplied about 73% of HLTH's EBITDA last quarter & 60% of it's revenues. I backed out all of the WebMD assets/liabilities from HLTH, then added back the market value of the WebMD shares, deducted intangibles, and got a tangible book value of $13 per share. HLTH is trading at $14.82. Now I didn't do any work on their other subs, that might have added some more value to HLTH. But WebMD seems to be the big sub where the most potential value is. And most of that "tangible" value is WebMD stock trading around 50x EBITDA.
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