The New Reality, Bizarro World version: NeueHealth gets $30M loan increase from NEA, now majority owner

Because NeueHealth needs money now after a 2023 cratering–then paying 2023 performance bonuses to its top execs. New Enterprise Associates (NEA), one of NeueHealth’s remaining key funders, has decided to double down on its bet and extended $30 million to NeueHealth. It’s structured as a credit facility agreement effective 8 April, with NeueHealth able to access $20 million immediately and the remaining $10 million after 180 days. It’s secured by penny warrants ($0.01) of 1,113,563 shares of the company’s common stock to the lenders. According to FierceHealthcare’s Noah Tong, this brings NEA’s shares to more than 2.76 million shares since it first entered the credit agreement. These warrants which allow the purchase of shares at a nominal price are divided among various NEA entities., NeueHealth release, SEC Form 8-K

NEA is now majority owner at 60%, up 10 percentage points. It can also appoint one of its members to NeueHealth’s board, which will expand to 11 members.

Despite the disclosure in its March 10-K that additional funding was needed this year to continue as a going concern, the need for fast cash was urgent enough that the board of directors’ audit committee approved a waiver of shareholder approval on the warrant issuance, as waiting would jeopardize the financial viability of the company. NeueHealth stated the additional cash would be used for general business purposes.

The additional cash infusion is after shocking many observers in healthcare with CEO Mike Mikan’s $1.9 million bonus for performance, along with cash bonuses of $875,000 to CFO Jay Matushak and Executive Vice President of Consumer Care Tomas Orozco. NeueHealth’s 2023 was marked by exiting all their healthcare plans, owing tens to hundreds of millions to states on losing plans and CMS on repayment agreements, a name change from Bright Health, an HQ move, and finally a net loss of $627.7 million with an adjusted EBITDA loss of $8.5 million for 2023. TTA 5 April

Industry observer Ari Gottlieb to both Mr. Tong and in his own LinkedIn post noted that NeueHealth reported that they had, at the end of 2023, $90 million in unrestricted cash. He also noted that CalSTRS, the California State Teachers Retirement System, NeueHealth’s other major investor, did not participate. Mr. Gottlieb also speculated that Molina Healthcare, to which Bright Health sold their Medicare Advantage (MA) plans, may ask for further adjustments to the payment price as the MA plans’ performance was poor.

Has NEA lost its investors’ minds and cash–or are they seeing something we don’t see in NeueHealth?

Editor’s note: The reference to Bizarro World, for those unfamiliar with the Superman oeuvre, is explained here.

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