Babylon retreats from public listing as losses climb

Shares in Babylon Health were pummelled yesterday after it said it would go back into private hands and withdrew its financial forecasts for the year.

The company plans to cede ownership of the business to its main lender – AlbaCore Capital – under a “restructuring and recapitalisation” plan that includes a renegotiation of an existing $300 million loan plus an additional $34.5 million in new funding.

Shares in the company have plunged around 83% after the announcement, which indicated that Babylon will be sold to a newly-formed company capitalised by AlbaCore “without the approval of or any payment to Babylon…shareholders or other equity instrument holders.”

That may sound brutal, but the reality is that investors who bought into the company less than two years ago when it went public on the New York Stock Exchange via a merger with a blank cheque company have already seen most of their stake evaporate.

Babylon’s debut share price was almost $243, buoyed by the hyperbole around digital health in the midst of the pandemic lockdown, and its market cap was over $3.5 billion.

Since then, the shares have lost more than 99% of their value, currently hovering a little above $1, and last year the company was forced into a reverse share split manoeuvre to boost its share price and avoid being delisted. Its market cap today stands at less than $30 million.

The company – led by Ali Parsa (pictured above) – has also been exploring strategic alternatives, including additional fundraising and the sale of its Meritage Medical Network of around 2,100 independent physicians in California, according to a statement. It has also been cutting staff and pulling out of NHS partnerships in the UK.

Considering administration in UK?

One point not included in the press materials was that Babylon is considering placing the business under administration in the UK “in the very near term, while we have sufficient cash on hand to be able to implement an orderly liquidation or restructuring of our liabilities and/or a sale of our assets through a court-appointed administrator.”

Shares recovered slightly in after-hours trading, perhaps on speculation that administration would provide a way for investors to claw back some of their money.

The company’s announcement came alongside its first-quarter financial update, which revealed an increase in revenue to $311 million from $266 million a year ago, but with net losses more than doubling to $63 million from $29 million.

Babylon’s core business is primary care delivery that draws on remote consultations with healthcare providers and an artificial intelligence-powered app for diagnosis, coupled with in-person healthcare delivery.

It has expanded its portfolio in the last couple of years through the acquisitions of Higi, which operates a network of health kiosks in retail chains, and DayToDay Health, which provides digital clinical services for surgery patients.