On April 17, 2025, UnitedHealth (UNH) experienced a massive drop of 22.38%.
Unprecedented Nature of This Crash:
· This marks UNH’s largest single-day decline since 1999.
· As the highest-weighted healthcare stock in the Dow Jones Industrial Average, UNH’s plunge caused the Dow to fall while the S&P 500 rose—a divergence that has occurred only once since 1954.
Media’s Explanation for the Crash:
*“The company lowered its full-year earnings guidance. For UnitedHealth, such a downward revision is rare, as the company typically provides conservative forecasts... It now expects 2025 EPS betwe 26and26.50, far below its prior guidance of 29.50–30 and the consensus estimate of $29.74.”*
But Is This the Full Story?
The Q1 2025 earnings report showed no significant decline in revenue or profit, and user growth even outperformed the previous quarter. As for the EPS issue highlighted by the media:
· GAAP EPS: $6.85
· Adjusted EPS: $7.20
· Difference: $0.35
From a beginner investor’s perspective, this roughly translates to: “Management initially promised 7.20persharebutnowcanonlydeliver6.85. Investors, disappointed, perceive the stock as overvalued and sell.”
But Was the Crash Really Due to the EPS-Adjusted EPS Gap?
Historical data shows:
Such gaps have existed over the past 20 quarters, and $0.35 is not unusually large. Thus, blaming the crash solely on quarterly financials doesn’t hold up.
Digging Deeper into Financial Reports:
On April 1 and March 18, the company granted symbolic stock awards (dozens to hundreds of shares) to directors and executives, causing no major price fluctuations.
Anomalies Detected on February 14 and 20:
February 14: A group of 7 executives collectively sold 2,775 shares at $523.51 during the closing auction. The volume was small, but the coordinated selling triggered a 4% drop the next day.
February 20–21:
5 executives sold 17,000 shares at $502.42 on February 20.
On February 21, the stock opened lower, briefly dropped 10%, then recovered to close down 7%. Later that day, 7 executives sold 27,000 shares at $466.42.
This Appears to Be a Test:
On February 14, they sold a small amount to gauge market reaction. After a one-day dip, the stock stabilized.
On February 20–21, they sold larger batches, observing buyer resilience before executing another round.
New Questions:
Executive stock sales before earnings reports (February 27) could be routine, but why did the market react on the same day (February 21) when disclosures typically lag by two days?
Could there be insider trading or fragmented selling (e.g., “spoofing” or “layering”)?
Major Shareholders’ Reactions:
Before the April 17 crash, no significant insider selling occurred.
On April 4, directors and executives even bought more shares.
This rules out a coordinated dump by insiders or institutions. So, who was shorting UNH?
Possible Explanations:
Hidden Risks: The company might be concealing undisclosed financial troubles.
Smart Money Detecting Weakness: Some traders may have sensed instability and shorted the stock.
Post-Crash Behavior:
After the crash, major institutions and executives stayed quiet. Near 400,twosmallfundsentered.
Oncethestock brokebelow400, several small funds exited.
$400 was a psychological support level.
Risk Assessment:
High Holding Risk:
· Potential undisclosed company risks.
· Persistent short-selling pressure.
· The breach of 400 suggests further declines to $380 or $350 before stabilizing.
Comments