Cano Health (CANO) False or Misleading Reports and Stock Losses Class Action

As a public company, Cano Health, Inc. (NYSE: CANO) must make public filings with the Securities and Exchange Commission (SEC). The complaint for this class action alleges that Cano made false or misleading statements in its 2020-2021 filings, in violation of the Securities Exchange Act of 1934. Named as defendants in addition to the company are three individuals—two chief executive officers (CEOs) and its chief financial officer (CFO).

The class for this action is all persons and entities who bought or otherwise acquired Cano securities between May 18, 2020 and February 25, 2022, and who were damaged when the alleged need for corrective disclosures was announced.

Cano was originally a special purpose acquisition company called Jaws Acquisition Corp. In June 2021, it merged with Primary Care (ITC) Intermediate Holdings LLC, changed its name to Cano Health, and began offering primary care medical services in the US and Puerto Rico. This merger is referred to in the complaint as the business combination.

When Cano Health makes its public filings, it must comply with Financial Accounting Standards Board guidelines. These including something called ASC 606, under which, the complaint alleges, “Cano must analyze its revenue recognition with respect to, inter alia, certain Medicare risk adjustments.” Apparently, the business combination caused some difficulty with respect to this.

The complaint alleges that the defendants in this case made materially false and misleading statements regarding the Company’s business, operations, and compliance policies.” Among these statements and omissions, the complaint alleges, were the following:

• “Cano overstated its due diligence efforts and expertise with respect to acquiring target businesses[.]”
• The company therefore did inadequate due diligence as to whether, after the business combination, it “could properly account for the timing of revenue recognition as prescribed by ASC 606…”
• It therefore “misstated its capitated revenue, direct patient expense, accounts receivable, net of unpaid service provider costs, and accounts payable and accrued expenses[.]”
• As a result, Cano had an increased risk of filing one or more of its reports late.
• Also, the company’s public statements were materially false and misleading.

The problems came to light on February 28, 2022, when Cano announced it would delay its filings for the fourth quarter and full year of 2021, its associated conference call, and its updated 2022 guidance, which had originally been scheduled for that day.

It gave as a reason that “the Company and its independent auditor … identified certain potential non-cash adjustments to account for revenue recognition under accounting standard ASC 606.” This, it said, would “delay[] recognition of certain amounts related to the Medicare Risk Adjustment to subsequent periods[.]”

After the announcement, Cano’s Class A common stock fell by 6.17%, closing at $4.87 that day.

Article Type: Lawsuit
Topic: Securities
Tags: Providing False or Misleading Information, Securities, Stock Losses