OMI

Owens & Minor ($OMI) Hedge Fund Buys $27M Amid 80% Crash... Potential Surge Upon Restructuring Completion

08/15/2025 00:34

The message Owens & Minor ($OMI) is sending to investors is crystal clear. While the company is currently experiencing severe pain, some professional investors view this as a golden opportunity. With shares plummeting nearly 80% over the past year and a half, understanding why major hedge funds are pouring tens of millions of dollars into the stock has become a critical task for investors. Owens & Minor, founded in 1882, is a Fortune 500 healthcare solutions company focusing on medical supply distribution and home healthcare services. The company is currently undergoing a massive restructuring, divesting its low-margin Products & Healthcare Services (P&HS) business to focus on the high-margin Patient Direct segment. This process has generated enormous losses, with shares falling from $17 in June 2024 to the current $5-6 range. However, the dramatic shift in insider trading patterns deserves attention. Unlike the executive selling that continued through the first half of 2024, a completely different pattern has emerged since 2025. Coliseum Capital Management has purchased over $27 million worth of $OMI shares from February through August. Particularly notable is Christopher Shackelton's $8 million purchase in mid-August, suggesting these investors view current price levels as severely undervalued. Examining Coliseum Capital's buying strategy reveals an interesting pattern. They began purchasing when shares were in the $9 range and continued accumulating as prices fell to $7, and even into the $5 range. This isn't simple bottom-fishing but appears to be a long-term investment based on confidence in value realization post-restructuring completion. Investors should carefully examine these professional investors' judgment. The company's financial situation is undeniably serious. With $2.1 billion in total debt and negative equity of $281 million, the company is completely overleveraged. The current ratio of 0.86 also raises short-term liquidity concerns. However, the key is distinguishing whether this represents one-time restructuring costs or fundamental business model limitations. The company has reduced debt by $647 million over the past two years, and adjusted EBITDA remains at $523 million, demonstrating that core business cash generation capabilities remain intact. $OMI's Patient Direct segment maintains a high 9.7% operating margin and benefits from structural growth drivers including aging populations and rising chronic diseases. The question is how investors evaluate the short-term disruption during this transition to higher-margin business. While the terminated Rotech acquisition required an $80 million breakage fee, this could be viewed as an opportunity to avoid excessive leverage increases. Key indicators investors should monitor include: successful completion of the P&HS divestiture to significantly reduce debt, whether Patient Direct segment growth rates meet expectations, and maintenance of stable adjusted EBITDA. If all three conditions are met, current share prices likely represent significant undervaluation. In an optimistic scenario, $OMI could reemerge as a pure-play Patient Direct company post-restructuring, with high margins and growth receiving market recognition, potentially driving shares back to $15-20 levels - representing 200-300% upside from current levels. The most realistic base case scenario anticipates rational valuation in the $8-12 range based on stable cash flows following debt cleanup. However, risk scenarios cannot be ignored. If P&HS divestiture is delayed or completed at lower-than-expected prices, or if Patient Direct growth disappoints, further share price declines are inevitable. Particularly if liquidity crisis materializes, additional declines to $3-4 cannot be ruled out. While large-scale buying by professional investors like Coliseum Capital is certainly a positive signal, their judgment isn't always accurate. However, considering their information depth and analytical capabilities, the current risk-reward ratio at these price levels appears quite attractive. Investors should carefully consider opportunities to capitalize on this unique situation within their risk tolerance parameters.