Analyst Predicts Xerox/Conduent to Pay $500 Million to Texas to Settle Medicaid Fraud Lawsuit – Share Price Drops

ConduentUPDATE:  Conduent Share Price Drops 13% Over The Last Few Days – The stock market has apparently reacted harshly to the recent Seeking Alpha analysis on the underappreciation of the $2 billion Texas Medicaid fraud lawsuit against Xerox/Conduent.  The stock price of the company is now sitting at $17.69, June 28, a 13% drop from its 52-week high on June 15 of $20.15.  Check current share price here.

A contributor to the popular online investment publication Seeking Alpha has predicted that Xerox/Conduent will pay the Texas Attorney General some $500 million to settle its $2 billion Medicaid fraud lawsuit before trial this November.  The analyst which goes under the nom de plume of “The Friendly Bear” is an institutional investor “focused on short selling.”

Risk from lawsuit underappreciated

The analyst thinks that the risk factor to investors from the Texas Medicaid lawsuit has been underappreciated as the $2 billion figure represents 50% of Xerox/Conduent’s $4 billion capitalization and is recommending investors sell the company’s stock short which he himself is doing.   Conduent was formed when Xerox spun off its government contract business in December of 2016.  The new company assumed full liability for the outcome of the lawsuit.

Can’t afford a trial

The trial for Xerox/Conduent is set for November.  The analyst believes that the company cannot afford a public trial and a possible jury verdict which could award triple damages against the firm.  Therefore, he predicts a settlement in the near future and considering Texas’s settlements in similar fraud cases fully expects a minimum settlement of $500 million.

Share price plummetts

Share price of the firm has plummetted from a one year high of $20.15 a few days ago on June 15 to $18.35 June 25.

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