Cano provides primary care medical services to its members in the United States and Puerto Rico. The Company owns and operates medical centers, as well as operates pharmacies. Cano used to be a special purpose acquisition company (“SPAC”) and operated under the name “Jaws Acquisition Corp.” A SPAC, also called a blank-check company, is a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, other entity, or person. On June 3, 2021, Jaws consummated a merger with Primary Care (ITC) Intermediate Holdings, LLC, whereby, among other things, Jaws changed its name to “Cano Health, Inc.” and began to provide primary care medical services (the “Business Combination”). As a publicly-traded company, Cano must adhere to strict financial reporting requirements by, among other things, timely filing periodic financial reports with the U.S. Securities and Exchange Commission and complying with Financial Accounting Standards Board guidelines, including Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”). Particularly, under ASC 606, Cano must analyze its revenue recognition with respect to, inter alia, certain Medicare risk adjustments. The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Cano overstated its due diligence efforts and expertise with respect to acquiring target businesses; (ii) accordingly, Cano performed inadequate due diligence into whether the Company, post-Business Combination, could properly account for the timing of revenue recognition as prescribed by ASC 606, particularly with respect to Medicare risk adjustments; (iii) as a result, the Company misstated its capitated revenue, direct patient expense, accounts receivable, net of unpaid service provider costs, and accounts payable and accrued expenses; (iv) accordingly, the Company was at an increased risk of failing to timely file one or more of its periodic financial reports; and (v) as a result, the Company’s public statements were materially false and misleading at all relevant times. On February 28, 2022, Cano issued a press release “announc[ing] it will delay its fourth-quarter and full-year 2021 earnings release, conference call, and 2022 guidance updates, previously scheduled for Monday, February 28, 2022.” In explaining the delay, Cano advised that “in the course of finalizing its audit of the financial statements for the year ended December 31, 2021, the Company and its independent auditor . . . identified certain potential non-cash adjustments to account for revenue recognition under accounting standard ASC 606.” Specifically, Cano advised that “[t]he adjustments relate to how and when the Company accrues revenue related to Medicare Risk Adjustments” and that “[t]he adjustments are expected to impact the timing of revenue recognition, by delaying the recognition of certain amounts related to the Medicare Risk Adjustment to subsequent periods[.]” On this news, Cano’s Class A common stock price fell $0.32 per share, or 6.17%, to close at $4.87 per share on February 28, 2022. On March 14, 2022, Cano filed its annual report for the quarter and year ended December 31, 2021 (the “2021 10-K”). That filing stated, inter alia, that “[t]he correction in the timing of revenue recognition under ASC 606 resulted in adjustments to capitated revenue, direct patient expense, accounts receivable, net of unpaid service provider costs, and accounts payable and accrued expenses[,]” and that the Company, therefore “restated its financial statements for each of the quarterly periods ended March 31, 2021, June 30, 2021 and September 30, 2021 in the [2021 10-K.]” For example, the 2021 10-K reported that, as restated, capitated revenue decreased 2.13% for the three months ended March 31, 2021; 13.11% for the three months ended June 30, 2021; and 5.58% for the three months ended September 30, 2021.
Notes:
The alleged class includes : All persons and entities other than Defendants that purchased or otherwise acquired Cano securities between May 18, 2020 and February 25, 2022, both dates inclusive.
For More information as well as to join this case please contact Atara Twersky, Esq. at atara@twerskylawgroup.com or atwersky@aftlaw.com. Atara is Principal at Twersky Law Group and Of counsel at AF&T law firm where she is director of Investor Services. Atara focuses her practice on assisting her clients with increasing their investment portfolio recoveries and ensuring that their portfolios remain healthy and robust. For more information on shareholder recoveries click here and to listen to Atara’s podcast with notable guests in the Pension fund Industry listen to Pension and Investments Podcast, on all matters related to your investment portfolio and more. For more information on Atara and her legal work connected to shareholder protection click here.
