Carson Block’s Muddy Waters takes short position in online health marketplace eHealth


Carson Block

Anjali Sundaram | CNBC

Carson Block’s Muddy Waters Research announced Wednesday it has taken a short position in eHealth Inc., which owns a digital health insurance exchange. 

Block, the firm’s founder, disclosed the position on CNBC’s “Squawk Box.

Muddy Waters argues eHealth, with a stock market value of $3 billion as of Tuesday’s close, uses aggressive accounting techniques to obscure what is actually an unprofitable business. 

Muddy Waters also casts doubt on eHealth’s growth since 2018, saying that it’s been driven largely by direct response TV advertising. That strategy has resulted in acquiring customers with high churn rates, Muddy Waters adds.

Shares of Santa Clara-based eHealth fell 10.5% on Tuesday to $116.90 each. But the stock has held up well so far this year, rising 21.7% in 2020 as of Tuesday’s close. The S&P 500 is down 17.7% in that same period.

Shares of eHealth are is up more than 70% in the past 12 months.

Scott Flanders, eHealth’s CEO, discussed the company’s business model on CNBC in early March, explaining “consumers pay nothing in our model.”

“We get paid by the health insurance carrier, who are generous in paying commissions because we’re helping them expand in their business. We’re a distribution partner for them,”  Flanders said on “Mad Money.”

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