MPW continues gaining afterhours after Steward sells doctor network to UnitedHealth

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MPW stock rose as much as 20% on Wednesday.
Non-paying tenant Steward Health Care agreed to sell its physician network to UnitedHealth.
Proceeds are expected to be used to pay back Medical Properties Trust.
Steward owes $50 million from 2023 and up to $55 million in deferred rent from 2024.

Medical Properties Trust (MPW) stock settled 18.6% higher, reaching a new range high on Wednesday, after a long-time, non-paying customer decided to sell their physician network to UnitedHealth Group (UNH). This development is expected to give beleaguered hospital operator Steward Health Care System the ability to repay all of its past rent bills to Medical Properties Trust, a real estate investment trust (REIT).

MPW stock gained as much as 20% on Wednesday, rising to an intraday high of $4.79, before ending the day slightly lower and failing to close the price gap from its related plunge on January 5. Afterhours, MPW gained a further 1%.

The Dow Jones led the market on Wednesday, closing up 1.22%, while the S&P 500 (+0.86%) and NASDAQ Composite (+0.51%) tagged along.

Medical Properties Trust stock news

MPW stock began shooting higher immediately after media reports emerged that problem tenant Steward Health Care had agreed to sell its physician network to UnitedHealth Group.

The news was first reported by The Boston Globe, which discovered public filings from UnitedHealth’s Optum Care unit with the Massachusetts Health Policy Commission. No price tag was given for the deal in the filing.

Back on January 4, Medical Properties’ management said that it had entered into an agreement with Steward to recoup its losses. At that time, Steward owed Medical Properties Trust about $50 million in unpaid rent through the end of 2023.

Under the new agreement, Medical Properties provided Steward with a $60 million bridge loan, which the latter would use to fund its turnaround plan. The plan called for Steward to bring on outside investors or sell some of its existing hospital operations at 33 locations across the US in order to pay back Medical Properties by June 30, 2024.

The Dallas-based Steward will now likely pay back the $50 million in back rent from 2023 plus the $55 million or less in deferred rent from 2024, in addition to the $60 million bridge loan. That bridge loan in January caused MPW stock to collapse by 29% in value on January 5. The news about UnitedHealth, one of the nation’s largest health insurance companies, is now rectifying those worries.

It may not be long now before Medical Properties Trust can raise its dividend. The company slashed its quarterly dividend from $0.29 per share to $0.15 per share in the summer of 2023.

Penny stocks FAQs

Originally, penny stocks were any stock that traded for less than $1, i.e. pennies. The Securities & Exchange Commission has since altered the definition to include any stock that trades for less than $5. Penny stocks are typically associated with small companies that have either experienced poor results, sending their share price down, or with companies who dilute their share price by issuing lots of shares over time in order to fund operations or acquisitions.

Some penny stocks trade on respected exchanges, such as the NASDAQ or the NYSE. Examples of these are Mullen Automotive (MULN) and Bark (BARK). Those exchanges have requirements though. For the NYSE, listed stocks must have 1.1 million publicly traded shares outstanding with a market value of at least $40 million. The NASDAQ requires a share price minimum of $4, a minimum of 1.25 million shares and a market cap of $45 million. Most penny stocks, however, trade on the OTC (over-the-counter) market. This may mean the OTC Bulletin Board or the privately-owned OTC Markets Group.

Quite often the sharpest movers on any normal trading day are found among penny stocks. This is because non-penny stocks tend to have more liquidity, and the market is more certain about larger companies’ long-term values. Penny stocks are illiquid, meaning there is little supply available if an announcement drives more buying demand into a particular stock. There are no market makers that hold large amounts of penny stocks just to dispense them at a slightly higher price point. Additionally, most of these penny stocks suffer from a news desert where few market players know anything relevant about them. This is why a small biopharma company can issue news about a successful drug trial and immediately rocket 500% higher, with no analysts on Wall Street covering it.

Typically, the answer is “No”. Penny stocks are more risky than higher-priced stocks on average. Penny stock investors have a higher chance of losing their capital by investing in weaker companies. There is a reason why they are penny stocks in the first place, which is that largely the mainstream market is not interested in investing in them. Two groups of investors tend to focus on penny stocks, however. The first group are day traders, who know that the lack of liquidity in penny stocks could lead to extremely large swings over a short time period. The other group is made up of investors who like the fact that these stocks are disregarded. This allows these investors to gain an advantage by benefiting from upcoming announcements, because the larger market is not paying attention.

Medical Properties Trust stock forecast

Medical Properties Trust stock has seen better days. The hospital REIT traded in the low $20s before experiencing issues with two of its largest tenants in 2022, Prospect and Steward. Since then it has been touch-and-go, and its heavily-shorted stock plunged as low as $2.92 earlier this year. Even after Wednesday’s spike, which was the best trading session in multiple years for the stock, MPW is still down for the year. The stock closed at $4.91 at the end of 2023.

The good news is that MPW stock has now seen its Relative Strength Index (RSI) on the weekly chart move above recent highs to a level not seen since August 2023. This means that long-delayed momentum is finally on MPW’s side. Short-sellers beware.

MPW weekly stock chart

MPW stock has risen as high as $4.79 on Wednesday, but that price tag is still below the January 4 low of $4.85 before the REIT plunged in the following session. In this sense, bulls have not yet claimed their prize. That prize would be entirely closing the gap with the $4.85 low. Since markets love to fill price gaps, traders should expect that level to be retested.

Another good sign is that MPW stock has moved to a new range high above the $4.69 resistance seen on March 6 and 7. Expect the health REIT to retest the heavy volume zone around $5.00 once the $4.85 level is taken out.