CRH Medical is down about 25% this morning after announcing that one of its major contracts representing 20% of its EBITDA is set to not renew as expected at the end of 2021. This is an ugly development. CRH operates in various clinic and relies on contracts to do so that are renewable periodically. I had asked the company questions about certain risks around renewal and I thought I had been assured there was nothing to worry about.
The company does hope to continue negotiations for a potential renewal of the contract.
Unfortunately CRH is a small niche business which makes it more susceptible to this and other risks.
At this point I will continue to hold as I don’t want to sell into what could be an over reaction to the news.
CRH paid significant amounts in numerous transactions to acquire the contracts to provide service in numerous clinics. It’s possible that this non-renewal has revealed a risk which could affect many of their other contracts.
This stock now has to be considered to be very risky.