ACA Coverage Concerns Spark Oscar Health Insider Purchase – The Special Situations Report Episode #62

Episode Summary

Executive Summary: Episode 62 of Special Situations Report covers four event-driven setups: a potential Commvault sale with Toma Bravo interest, Land’s End’s tender-related insider selling and new $100M buyback, Mark Bertolini’s unusual stock purchase amid Oscar Health’s ACA turbulence and improved 2026 outlook, and mounting activist pressure at Lamb Weston alongside insider buying and capital return. The hosts weigh valuation, insider behavior, and strategic optionality across each name.

Main Topics: Commvault Systems potential sale (Priority: 5/5): The hosts discuss reports that Commvault is exploring strategic alternatives after receiving takeover interest, with Toma Bravo named among potential bidders. They view the company as attractive due to AI-driven data security demand, solid growth, profitability, and a depressed valuation. Toma Bravo’s acquisition pattern in software (Priority: 4/5): A broader discussion of Toma Bravo’s dealmaking spree and its long history of software acquisitions frames why the firm may pursue Commvault. The hosts note its large AUM, sector focus, and reputation for paying fair premiums. Land’s End tender offer, insider sales, and buyback (Priority: 5/5): The Land’s End segment focuses on WHP Global’s $45 tender offer for roughly 7% of shares, resulting in insider sales at the same price, followed by a new $100 million repurchase authorization after the prior program expired. Oscar Health: ACA volatility and insider conviction (Priority: 5/5): The hosts analyze Oscar Health’s earnings pressure from ACA subsidy changes, a high medical loss ratio, and market share shifts, then explain why CEO Mark Bertolini’s stock purchase and the company’s 2026 guidance support renewed optimism. Lamb Weston activism and capital allocation (Priority: 4/5): The discussion highlights JANA Partners’ and Starboard Value’s involvement, prior sale speculation, insider/director buying, and Lamb Weston’s buybacks and dividend as signs of possible strategic change despite low enthusiasm for the business model.

Key Arguments: Toma Bravo is a logical buyer for Commvault because it has a long track record in software, abundant capital, and a reputation for offering fair premiums. Commvault’s stock weakness appears disconnected from fundamentals: revenue, ARR, profitability, and cash generation remain strong despite AI-related valuation pressure. Land’s End’s recent insider sales were likely tied to WHP Global’s $45 tender offer rather than bearish insider sentiment. The new $100 million Land’s End buyback may provide technical support if management repurchases aggressively at depressed prices. Oscar Health suffered because 2025 ACA pricing assumptions were based on a healthier risk pool than actually materialized after Medicaid redeterminations pushed sicker members into marketplace plans. Mark Bertolini’s stock purchase matters even though it was not an open-market buy, because it signals valuation confidence and a desire to maintain ownership despite tax-related sales. Oscar’s 2026 guidance suggests 2025 was a reset year and that lower MLR and faster revenue growth may follow as the market stabilizes. Lamb Weston remains low-growth and low-margin, but activist ownership, insider buying, and capital returns raise the probability of a strategic event or operational turnaround.

Data Points: Toma Bravo AUM: Over $180 billion - Illustrates the private equity firm’s scale and ability to pursue large software deals. Toma Bravo deals over 15 years: More than 35 - Used to show the firm’s long-running activity in special situations. Toma Bravo software businesses invested in: Over 580 - Supports its deep focus on the software sector. Commvault stock move on sale speculation: More than 10% in a single day - Shares jumped after reports of takeover interest. Commvault revenue growth: 19% to $314 million - Most recent quarter, showing operating momentum. Commvault ARR: $1.09 billion, up 22% - Shows recurring revenue growth and customer demand. Commvault decline from high: Nearly 60% - Shares are down from their September all-time high. Commvault decline over last year: More than 40% - Used to support the argument that the valuation is attractive. Commvault valuation: About 17x forward P/E and under 3x sales - Described as potentially attractive for an acquirer. WHP Global payment to Land’s End: $300 million - Consideration for a 50% stake in the joint venture holding IP and licensing assets. WHP Global stock purchase commitment: $100 million at $45/share - Tender offer expected to acquire about 7% of Land’s End shares. Land’s End share price: $10.87 - Stock fell sharply after the tender-related trading window closed. Land’s End repurchase authorization: $100 million - New buyback announced on April 1 after prior authorization expired. Land’s End prior repurchases: 1.26 million shares for $16 million - Buybacks executed under the expired program. Eddie Lampert Land’s End sale: 1.3 million shares for $58.52 million - Largest insider sale tied to the tender offer at $45/share. Oscar Health revenue 2025: $11.7 billion - Full-year 2025 revenue, up from 2024. Oscar Health revenue 2024: $9.2 billion - Prior-year comparison for growth. Oscar Health net loss 2025: $443 million - Compared with profit in 2024 due to higher claims and MLR pressure. Oscar Health net income 2024: $25 million - Prior-year profitability reference. Oscar Health MLR 2025: 87.4% - Full-year medical loss ratio, above company comfort and indicative of costly claims. Oscar Health Q4 2025 MLR: 95.4% - Particularly weak quarter with unusually high claims severity. Oscar Health 2026 revenue guidance: $18.7 billion to $19 billion - Management expects strong top-line growth despite ACA headwinds. Oscar Health 2026 revenue growth midpoint: 61% YoY - Projected growth driven more by volume than price. Oscar Health 2026 MLR guidance: Around 82%-83% - Improvement versus 2025, suggesting a normalization in claims. Oscar Health market share: 17% in 2025 to 30% by start of 2026 - Management expects the company’s position to expand despite market contraction. ACA enrollment growth during pandemic: 11.4 million to 24.3 million - Explains how expanded subsidies boosted marketplace participation. Premium payment increase after subsidy expiration: 114% average increase - KFF estimate of higher out-of-pocket costs for subsidized enrollees. Some customer premium increase: Over 573% annual premium growth - Shows how severe the subsidy rollback can be for certain enrollees. Aetna ACA exit impact: About 1 million enrollees and a $448 million reserve - Example of industry-wide pressure from ACA changes. Centene ACA membership expectation: 40% reduction - Another insurer facing major ACA headwinds. Centene goodwill impairment: $6.7 billion - Q3 2025 charge related to ACA market deterioration. Oscar Health insider purchase: Nearly $12 million - CEO Mark Bertolini’s stock purchase filed on Form 4. Joshua Kushner investment: $31.7 million - Early insider-backed capital commitment that initially attracted interest. Lamb Weston activist stake: $9.7 million - JANA Partners added to its position last week. Lamb Weston valuation: 11x EBITDA and 15x free cash flow - Used to argue the stock is not expensive despite limited growth. Lamb Weston share repurchases: 2% of shares retired in the last five quarters - Evidence of capital return already underway. Lamb Weston dividend yield: 3.6% - Provides carry while waiting for a strategic outcome.

Pivotal Quotes: "Toma Bravo seems to have hit the perfect combination of time to raise capital and sector to invest in" — Asif Surya: Commentary on why the sponsor has been so active in software acquisitions. "I made a big mistake with that one, and it's good to be reminded of that through this Lance and experience." — Asif Surya: Reflection on prior investing mistakes and caution around apparel/retail situations. "Oscar Health remains one of the last major pure-play ACA insurers standing" — Asif Surya: Explaining why Oscar may have strategic value despite current ACA volatility.

Implications: Listeners should watch for deal catalysts, buyback support, and insider signals, but also for execution risk. Commvault and Lamb Weston may become event-driven winners, while Oscar Health looks like a turnaround/reset story with asymmetric upside if ACA conditions improve.